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quasi contract


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quasi contract and quantum meruit

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quasi contract

  1. 1. Name:-Dabhi Rahul B. Div.:- A (Finance) Roll No.:- 06 Sub: - Business law Collage: - DBIM (VNSGU)6. (A) What are quasi contracts? Enumerate the quasi contracts dealt withunder the Act. Also explain the term quantum meruit. When does the claimon quantum meruit arise?Ans :- Under certain circumstances, a person may receive a benefit to which thelaw regards another person as better entitled for which the law consider , he shouldpay to another person even though there is no contract between the parties. Suchrelationship are termed, quasi contract because although there is no contract oragreement between the parties. They are put as same position if there contract areconstructive contract are made between them under the law.A legal agreement created by the courts between two parties who did not have aprevious obligation to each other. A normal contract requires two parties to consentto mutually agreeable terms. Under a quasi-contract, neither party is originallyintended to create an agreement. Instead, an arrangement is imposed by a judge torectify an occurrence of unjust enrichment.Types of quasi contract:- (1) supply of necessaries (sec. 68)“if a person is incapable of entering into a contract or any one whom he is legallybound of support is supplied by another person with necessaries suited to hiscondition in life, the person who has furnished such supplies, is entitled to bereimbursed from the property to such incapable person”e.g. A supplies B, a lunatic with necessaries suitable to his condition in life, A isentitled to be reimbursed from B’s property.
  2. 2. (2) PAYMENT BY AN INTERSTED PERSON (sec. 69)A person who is interested in the payment of money which another is bound bylaw to pay, and who therefore pays it, is entitled to be reimbursed by the other.The conditions of the liability under sec. 69 are: 1. There must be a person who is bounded by law to make a certain payment. 2. There must be another person who is interested in such payment being made. 3. Payment must be have actually been made. (3) OBLIGATION TO PAY FOR NON-GRATUITOUS ACTS (Sec. 70) When a person lawfully does anything for another person or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the things so done or delivered. A, a tradesman, leaves goods at Bs house by mistake. B treats the goods as his own. He is bound to pay for them to A. Before any right of action under sec. 70 arises, 3 conditions must be satisfied: (1) The thing must have been done lawfully. (2) The person doing the act should not have intended to do it gratuitously. (3) The person for whom the act is done must have enjoyed the benefit of the act[union of India vs. Sita ram, AIR 1977,S.C. 329] (4) RESPONSIBILITIES OF FINDER OF GOODS (Sec. 71) A person, who finds goods to another and takes them into his custody, is subject to the same responsibilities as a bailee. He is bound to take as much care of the goods as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value. If he does not, he will be guilty of wrongful conversion of the property. Till the owner is found out, the property in goods will vest in the finder and he can retain the goods as his own against the whole world. Ex. F picks up a diamond on the floor on ks shop. He hands it over to K to keep
  3. 3. it till true owner is found out. No one appears to claim it for quite some weeksin spite of the wide advertisement in the newspapers. F claims the diamondfrom K Who refuses to return. K is bound to return the diamond to F who isentitled to retain the diamond against the whole world except the true owner.(5) Delivery by mistake or under coercion (sec. 72)A person to whom money has been paid, or anything delivered, by mistake orunder coercion, must repay or return it to the person who paid it by mistake orunder coercion.Ex. (1) A pays some money to B by mistake. It is really due to C. B must refundthe money to A. C, however, cannot recover the amount from C is no privity ofcontract between B and C.(2) A railway company refuses to deliver up certain goods to the consignee,except upon the payment of an illegal charge for carriage. The consignee paysthe sum charged in order to obtain the goods. He is entitled to recovers so muchof the charge as is illegally excessive.Sec. 72 does not draw any distinction between a mistake of fact and mistake oflaw {D. cawasji & co. vs. state, AIR. 1969 mys.23}Ex.(1). K paid sales tax on his forward transactions of bullion. Subsequentlythis tax was declared ultra vires. Held, K could recover the amount of sales taxand that sec. 72 is wide enough to cover not only mistake of fact but alsomistake of law.{sales tax officer, benares vs. kanhaiya lal mukand lal safaf,1959 S.C.J. 53}.(2) An insurance company paid the amount on a policy under the mistake thatthe goods had been destroyed by a peril insured against. The goods infact hadbeen sold. Held, the money could be recovered by the insurance company{Norwich etc. society ltd. vs. price W.H. LTD 1934 A.C. 455}
  4. 4. (3) An insurance co. paid the amount on a policy which had lapsed by a reasonof non- payment of premiums by the assured. The company knew this fact but itwas overlooked at the time of payment. Held, the company could recover theamount "however careless the party (company paying money) may have beenomitting to use the diligence to inquire into the fact"{Kelly vs. solari 1841 9 M.&W. 54}(6) Quantum meruit:-Latin for "as much as he deserved," the actual value of services performed.Quantum meruit determines the amount to be paid for services when nocontract exists or when there is doubt as to the amount due for the workperformed but done under circumstances when payment could be expected.This may include a physicians emergency aid, legal work when there was nocontract, or evaluating the amount due when outside forces cause a job to beterminated unexpectedly. If a person sues for payment for services in suchcircumstances the judge or jury will calculate the amount due based on time andusual rate of pay or the customary charge, based on quantum meruit byimplying a contract existed.The claims for quantum meruits are arise in below situation 1. When an agreement is found to be void. (sec. 65) 2. When some is done without any intention to do so gratuitously. (sec. 70) 3. When there is an expression or implied contract to render service but there is no agreement as to remuneration. 4. When contract is divisible.
  5. 5. (B) When is a seller of goods deemed to be an unpaid seller? What are hisrights against (i) the goods, and (ii) the buyer personally?Ans:- definition of unpaid seller :-A seller of goods is deemed to be an unpaid seller –1. When the whole of the price has not been paid or tendered; or2. When a conditional payment was made by a bill of exchange or other negotiableinstrument and the instrument has been dishonored. In other words, an unpaidseller is one who has sold goods on cash terms and has not received the whole ofthe price. It does not include a seller who has sold goods on credit, unless theperiod of credit has expired and the whole price has not been paid. A seller is anunpaid seller even if a part of the price remains unpaid.Rights of an unpaid seller: An unpaid seller has two-fold rights, namely –1> Rights against goods; and2> Rights against the buyer personallyAn unpaid seller has the following rights against goods notwithstanding thefact that the property in goods has passed to the buyer1. Right of lien,2. Right of stoppage of goods in transit3. Right of resaleRight of lien‘Lien’ is the right to retain possession of goods and refuse to deliver them to thebuyer until the price due in respect of them is paid or tendered. An unpaid seller inpossession of goods sold is entitled to exercise his lien on the goods in thefollowing conditions:a) Where the goods have been sold without any stipulation as to credit;b) Where the goods have been sold on credit, but the period of credit has expired;and
  6. 6. c) Where the buyer becomes insolvent, even though the period of credit may nothave expired.The right of lien can be exercised only for the non-payment of the price and not forany other charges, e.g. maintenance or custody charges which the seller may haveincurred in respect of the goodss already stated, lien depends on the physical possession of goods. Once thepossession is lost, the lien is also lost. In following cases, the unpaid seller loseshis right of lien:a) When he delivers the goods to a carrier or other bailee for the purpose oftransmission to the buyer without reserving the right of disposal of goods; orb) When the buyer or his agent lawfully obtains possession of the goods; orc) When the seller expressly or impliedly waives his right of lien.Right of stoppage of goods in transitIt is a right of stopping further transit of the goods while they are with a carrier forthe purpose of transmission to the buyer, resuming possession of the goods andretaining the possession until the price is paid. Thus, in a way this right is anextension of the right of lien.An unpaid seller can exercise this right only when-a. The buyer becomes insolvent;b. The property (ownership) has passed to the buyer;c. The goods are in the course of transit.It must be noted that this right can be exercised only when the goods are still intransit to the buyer; and this right comes to end when the buyer has obtainedpossession of the goods. Therefore, it is necessary to know as to what is theduration of transit.
  7. 7. Right of ResaleThe third right available to unpaid seller is the right of resale. It is called right ofresale because there has been already a sale by which the ownership has passed tothe buyer. This right is perhaps more valuable than the other two rights. In theabsence of this right, the other rights would be useless for the simple reason thatother two rights entitle the unpaid seller only to retain or regain possession ofgoods. However, if the buyer continues to be in default, the seller would behelpless particularly in the case of perishable goods. An unpaid seller can resell thegoods in the following cases:a) Where the goods are of a perishable nature; orb) Where such a right is expressly reserved in the contract in case the buyer shouldmake a default; orc) Where the seller has given notice to the buyer of his intention to resell and thebuyer does not pay or tender the price within a reasonable time.If on a resale, there is a loss to the seller, he can recover the same from thedefaulting buyer. But if there is a surplus, the seller can keep it with him becausethe defaulting buyer cannot take advantage of his own wrong. However, if nonotice is given by the seller to the buyer of his intention to resell (notice is requiredwhen the goods are not perishable and right of resale is not expressly reserved inthe contract of sale), the seller cannot recover any loss that he may incur on resale.Additionally, if he makes any surplus on the resale, he has to share it with thebuyer.An unpaid seller has the following rights against rights against the buyerpersonallyIn addition to the rights against the goods which we have discussed above, theunpaid seller has the following rights against the buyer personally: 1. Suit for price.Where the property in the goods has passed to the buyer, the seller is entitled to suefor price, whether the possession is with the buyer or the seller. Similarly, wherethe price is payable on a certain day irrespective of delivery, the seller may sue forthe price, if it is not paid on that day, although the property in goods has not passed.2. Suit for damages for non-acceptance. Where the buyer wrongfully neglects or
  8. 8. refuses to accept and pay for the goods, the seller has a right to sue the buyer fordamages for non-acceptance. Here, the seller seeks to recover the loss sustained byhim due to breach of contract by the buyer rather than the price of the goods.The Act lays down the rules for calculating the damages payable to seller in suchcase. Accordingly, where there is a ready market for the goods, the damages wouldbe equal to the difference between the contract-price and the market-price. Wherethere is no available or ready market for the goods, the measure of damages woulddepend on the facts of each case. Such damages may be equal to the full price ofthe goods plus reasonable charge for the care and custody of the goods.