Quasi contracts 1santhi narayanan

Illustration  Saurabh supplies goods to his customer Vishal who receives and consumes them. Vishal is bound to pay the price. Vishal’s acceptance of the goods constitutes an implied promise to pay.  Now, if the goods are delivered by a servant of Saurabh mistaking Shubam for Vishal, then Shubam will be bound to pay compensation to Saurabh for the value if he uses those goods 2santhi narayanan

Meaning  Not a contract at all  One or the other essentials of a contract are absent  An obligation imposed by law upon a person for the benefit of the other even in the absence of a contract.  Based on the principle of equity 3santhi narayanan

Features  Imposed by law and does not arise from any agreement  Duty of a party and not the promise of any party is the basis of such contract  Right under it is always a right to money  Right under it is available against specific persons and not against the whole world  A suit for breach may be filed in the same way as in case of a complete contract. 4santhi narayanan

Distinction Quasi Contract  The essentials for the formation of a valid contract are absent.  Obligation is imposed by law. Contract  The essentials for a valid contract are present.  Obligation is created by the consent of the parties. santhi narayanan5

Types of quasi contracts Right to recover the price of necessaries suppliedRight to recover money paid for another personRight to recover for non-gratuitous ActResponsibility of finder of goods Right to recover from a person to whom money is paid or thing is delivered, by mistake or under coercion 6santhi narayanan

Right to recover the price of necessaries supplied  The person who has supplied the necessaries to a person who is incapable of contracting or anyone whom such incapable person is legally bound to support, is entitled to claim their price from the property of such incapable person. santhi narayanan7

Right to recover money paid for another person  A person who is interested in the payment of money which another is bound by law to pay and who therefore pays it, is entitled to be reimbursed by other. santhi narayanan8

Right to recover for non- gratuitous Act  Ex: P had constructed certain structures at the oral request of an officer of civil supplies department. The State accepted the works but attempted to escape liability on the pretext of non-compliance of certain requirements of the Government of India Act  Held- By accepting the benefit of structures an obligation has arisen to pay for the same. santhi narayanan9

Quantum meruit  “as much as earned’  Payment in proportion to the amount of work done.  When a person has begun the work and before he could complete it, the other party terminates the contract or does something which make it impossible for the other party to complete the contract, he can claim for work done under the contract. 10santhi narayanan

Contd-  He may also recover the value of the work done where the further performance of contract becomes impossible.  The party claiming relief has to establish the following: He has been ready and willing to perform the contract. He has made a part performance of the contract for which the remuneration is due. 11santhi narayanan

Cases in which the claim of quantum meruit can arise In case of void agreement or contract that becomes voidIn case of non gratuitous actIn case of preventing the completion of the contractIn case of divisible contract In case of indivisible contract performed completely but badly. 12santhi narayanan

Performance of contract 13santhi narayanan

Meaning  A contract is said to have performed when the parties to the contract either perform or offer to perform their respective promises.  Sec 37 : “The parties to the contract must either perform or offer to perform their respective promises, unless such performance is dispensed with or excused under the provision of the Act, or any other law.” 14santhi narayanan

CONTRACTS WHICH MUST BE PERFORMED  The parties to a contract must either perform,  ‘actual performance’ or ‘attempted performance’, i.e. ‘offer to perform’ or offer to perform, their respective promises,  unless such performance is dispensed with or excused under the provisions of this Act, or of any other law.  Promises bind the representatives of the promisors in case of the death of such promisors before performance, unless a contrary intention appears from the contract.

Contd -  Types of performance: Actual performance- It occurs when both the parties perform their promises according to the terms of the contract Attempted performance 16santhi narayanan

Contd -  Persons who can demand performance Promisee Legal representatives Third party Joint promisee  Persons who must perform Promisor Promisor’s agent Legal representative Third party Joint promisors 17santhi narayanan

Time and place of performance  The contract must be performed within a reasonable period of time.  The promise must be performed in the manner and at the time prescribed by the promisee. 18santhi narayanan

Contd-  Time as essence of contract – It is essential for the parties to a contract to perform their respective promises within the specified time. 19santhi narayanan

Breach of contract

Contd-  Breaking of contract means a breaking of the obligation which a contract imposes  Breach of contract is of two types: Actual breach of contract Anticipatory breach of contract

Actual breach of contract  At the time when the performance is due  During the performance of the contract

Anticipatory breach of contract  Ex; A undertakes to supply certain goods to B on 1 st January. Before this date, he informs B that he is not going to supply goods. This is an anticipatory breach of contract  Anticipatory breach does not necessarily discharge the contract, unless the promisee (the aggrieved party) so chooses.

Remedies for a breach of contract  A contract gives rise to correlative rights and obligations.  A right accruing to a party under a contract would be of no value if there was no remedy to enforce that right in the law court in the event of its infringement or breach of contract.  A remedy is the means given by law for the enforcement of a right

Contd –  When a contract is broken the injured party has one or more of the following remedies. Rescission of the contract Suit for damages Suit for quantum meruit Suit for specific performance of the contract Suit for injunction

Rescission  A right not to perform obligation  The aggrieved party is discharged from all the obligations under the contract.  He is entitled to claim compensation for damage which he has sustained for the non performance of the contract

Suit for damages  Monetary compensation allowed for the loss suffered by the aggrieved party due to the breach of the contract.  Case; Hadley vs Baxendale

Contd - Rule ; Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be as such as may fairly and reasonably be considered either arising naturally ie, according to usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in contemplation of both the parties, at the time they made the contract, as the probable result of the breach of it.

Section 73  Deals with compensation for loss Ordinary damages Special damages Exemplary damages Nominal damages Damages for inconvenience and discomfort Liquidated damages and penalty Stipulation for interest Forfeiture of security deposit

Suit for specific performance  Demanding the court’s direction to the defaulting party to carry out the promise according to the terms of the contract

Suit for injunction  Demanding court’s stay order  Injunction means an order of the court which prohibits a person to do a particular act.

Suit for quantum meruit  Right to claim compensation for the work already done.  Ex: C an owner of a magazine engaged P to write a book to be published by installments in his magazine. After a few installments were published, the publication of the magazine was stopped. It was held that P could claim payment for the part already published.

Discharge of contract 33santhi narayanan

Discharge of a contract  Discharge of a contract means the termination of contractual relations between the parties to a contract. A contract is said to be discharged when the rights and obligations of the parties under the contract come to an end. 34santhi narayanan

Modes of discharge of contract  Discharge by performance (a) By actual performance (b) By attempted performance  Discharge by mutual agreement: (a) Novation – Substitution of a new contract (b) Rescission – Cancellation of contract (c) Alteration – Change in terms of contract with mutual consent of parties. (d) Remission – Acceptance by promisee of a lesser fulfillment of the promise made 35santhi narayanan

Contd - (e) Waiver – Intentional relinquishment of a right under the contract.  Discharge by operation of law – (a) By death of promisor (b) By insolvency (c) By unauthorized material alteration (d) By the identity of the promisor and promisee 36santhi narayanan

Contd -  Discharge by impossibility of performance Effect of initial impossibility Effect of supervening impossibility 37santhi narayanan

Indemnity and Guarantee 38santhi narayanan

Definition  It is entered into with the object of protecting the promisee against anticipated loss.  A contract by which one party promises to save the other from loss caused to him by the promisor himself or by the conduct of any other person, is called a contract of indemnity. (Sec 124) 39santhi narayanan

Contd -  A lost his share certificate. He applied to the company for the issue of a duplicate certificate. The company asked A to furnish an ‘indemnity bond’ in its favor to protect it against any claim that may be made by any person on the original certificate. A, accordingly executed the indemnity bond. It is a contract of indemnity between A and the Company. A is the indemnifier and the Company is the indemnified or indemnity holder. 40santhi narayanan

Contracts of guarantee  A contract of guarantee is a contract to perform the promise, or discharge the liability of a third person in case of his default. (Sec 126)  Features Three parties Consent of surety Obligation arises in case of default Types of contract Primary liability  Consideration is necessary for contract of guarantee 41santhi narayanan

42 CONTRACT OF GUARANTEE  A “contract of guarantee” is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the “surety”; the person in respect of whose default the guarantee is given is called the “principal debtor”, and the person to whom the guarantee is given is called the “creditor”. A guarantee may be either oral or written. - Section 126  Person giving guarantee is also called as ‘guarantor’. However, Contract Act uses the word ‘surety’ which is same as ‘guarantor’. - - Three parties are involved in contract of guarantee. Contract between any two of them is not a ‘contract of guarantee’.

Contd-  Anything done, or any promise made, for the benefit of the principal debtor, may be sufficient consideration to the surety for giving the guarantee.  Ex; A advances a loan of Rs 5000 to B in consideration whereof C promises with A that is B does not repay. santhi narayanan43

CONSIDERATION FOR GUARANTEE Examples:  (a) B requests A to sell and deliver to him goods on credit. A agrees to do so, provided C will guarantee the payment of the price of the goods. C promises to guarantee the payment in consideration of A’s promise to deliver the goods. This is sufficient consideration for C’s promise.

Objectives of contract of guarantee  To secure the performance of a mercantile promise  To secure the honesty and fidelity of someone  To secure a person from injury arising out of some wrong committed by another santhi narayanan45

Bailment  It involves change of possession of goods from one person to another for some specific purpose.  Bailment is concerned only with goods Ex: A delivers a piece of cloth to B a tailor, to be stitched into a suit. There is a contract of bailment between A and B.  Sec 148: Delivery of goods by one person to another for some purpose upon a contract, that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. 46santhi narayanan

Pledge  Bailment of goods as security for payment of a debt or performance of a promise is called ‘pledge’.  A pledge is bailment for security..  Ex: If A borrows Rs 200 from B and keeps his watch as security for payment of debt, the bailment of watch is a pledge. 47santhi narayanan

Agency  Sec 182: An agent is a person employed to do any act for another, or to represent another in dealings with a third person.  Person for whom such Act is done – Principal  Agent – connecting link between the principal and third parties. 48santhi narayanan

Agency  Two essentials  Agreement between the principal and agent – agency depends on agreement but not necessarily on contract. No consideration is necessary to create an agency.  Intention of the agent to act on behalf of the principal. 49santhi narayanan

Test of agency  Has that person the capacity to bind the principal  Can he be made answerable to a third person by bringing him (the principal) into legal relations with the third person  can a privity of contract be established between that person and the principal?  If yes, he is an agent, otherwise not. 50santhi narayanan