Quasi Contract

What Is a Quasi Contract?

Quasi contract is another name for a contract implied in law, which acts as a remedy for a dispute between two parties that don't have a contract. A quasi contract is a legal obligation—not a traditional contract—which is decided by a judge for one party to compensate the other. Thus, a quasi contract is a retroactive judgment to correct a circumstance in which one party acquires something at the expense of the other.

These arrangements may be imposed when goods or services are accepted by a party even though they migt not have been requested. The acceptance then creates an expectation of payment for the providing party.

Understanding Quasi Contracts

Under common-law jurisdictions, quasi contracts originated in the Middle Ages under a form of action known in Latin as indebitatus assumpsit, which translates to being indebted or to have undertaken a debt.

This legal principle was the courts' way of making one party pay the other as if a contract or agreement already existed between them. So the defendant’s obligation to be bound by the an exchange is viewed to be implied by law. From its earliest uses, the quasi contract was typically imposed to enforce restitution obligations.

It would be handed down ordering the defendant to pay restitution to the plaintiff. The restitution, known in Latin as quantum meruit, or the amount deserved, is calculated according to the amount or extent to which the defendant was unjustly enriched.

This remedy is also referred to as a constructive contract as it is constructed by a judge when there is no existing contract between two parties. If there is an agreement or contract already in place, a judge will not create a quasi contract because there is no need to do so.

Purpose

Quasi contracts outline the obligation of one party to a second when the first receives a benefit or property from the second. A person might knowingly or unknowingly give something of value to another without an agreement being made. It is assumed that a reasonable person would pay for it, give it back, or otherwise compensate the giver upon receiving the item or service.

Quasi contracts are awarded as a remedy to a giver to keep them from being taken advantage of and keep others from being unjustly enriched.

Legality

Because the agreement is constructed in a court of law, it is legally enforceable, so neither party has to agree to it. The purpose of the quasi contract is to render a fair outcome in a situation where one party has an advantage over another. The defendant—the party who acquired the property—must pay restitution to the plaintiff—the wronged party—to cover the value of the item.

Requirements

Certain aspects must be in place for a judge to issue a quasi contract:

• One party, the plaintiff, must have experienced a loss as a result of a transfer.
• The defendant must have or acknowledged receipt of and retained the item of value, but made no effort or offer to pay for it.
• The plaintiff must then demonstrate through burden of proof why the defendant receive an unjust enrichment.
• The item or service cannot have been given as a gift.
• The defendant must have been given a choice to accept or deny the benefit.

Quasi Contract vs. Contract

Quasi Contract

• Only Implied in Law: Implied in law means that a payment obligation is created by law, in this case, a judge who renders a remedy.
• Ordered by a Judge: Quasi contracts are ordered by a judge because contracts implied in law are not covered under contract law.
• No Contract Exists: Quasi contracts are not contracts, they are remedies for disputes between parties that are the result of one party receiving an unjust enrichment.

Contract

• Can Be Express or Implied: There are generally two types of contracts, express and implied. An express contract is one where terms are laid out and both parties agree to abide by the terms. An implied contract is one where mutual assent is given for an exchange, but there are no explicit terms.
• Initiated by Party Agreement: The parties involved in an exchange agree to the exchange.
• A Legal Contract Exists: Express and implied contracts are legally recognizable and enforceable.

Types of Quasi Contract

The types of quasi contract are outlined in sections 68 thru 72 of the Contract Act of 1872, as follows:

• Section 68: A person who is incapable of making contracts is provided with the supplies by a third party on behalf of the incapable person or anyone he is legally obligated to support. Third parties can recover the price of the supplier from the property of the unable person.
• Section 69: A person who makes a payment on behalf of another party is obligated to pay the money according to law. Therefore, the person who made the payment is entitled to reimbursement from the other party.
• Section 70: When a person does something lawfully for another person, or delivers something without intending to do the same gratuitously, the receiving party is obliged to compensate the former party.
• Section 71: A person who finds goods that belong to another party and takes ownership of them has the same responsibility as a bailee.
• Section 72: Someone who has been paid or delivered under coercion or mistakenly must repay or return the money.

Advantages and Disadvantages of Quasi Contracts

Advantages of using a quasi contract include the fact that these legal instruments are typically based on the unjust enrichment principle. This prevents one party from gaining an undue advantage over another. Thus, it is a safeguard for innocent victims of wrongful acts and a legal alternative to compensation for damages, ensuring that the one who provides services or goods gets compensated for the same.  In order to comply with quasi contracts, all parties involved are obliged to follow them, as they are created by court order. 

There are also some drawbacks or limitations. Those who received benefits negligently, unnecessarily, and by miscount will not be held liable. Although a person can be liable under a quasi contract, he cannot be charged more than the amount he has received under the contract. Thus, there is no provision available for the recovery of more amount than that which has been received by the plaintiff - if the plaintiff obtains only part of the services/goods that he contracted for originally, he cannot claim a compensation as the whole amount is not recovered. 

 If there's an express agreement between the parties, plaintiffs have to give up all profits. Though a quasi contract is a legal remedy that provides protection from unjust enrichment of the beneficiaries of the services or goods, a plaintiff can get relief only if he can prove that he has suffered losses due to the breach of the contractual obligations of the defendant. 

The Bottom Line

With a quasi contract, a defendant is required to behave as if there was a legal contract with the plaintiff. It is designed so that one party is not unjustly enriched at the expense of the other. Unjust enrichment is when someone benefits unfairly, either due to circumstance or the other party's misfortune. A quasi contract is rendered by a judge, as a settlement, after the fact, when a formal contract otherwise did not exist.