Unlike a contract, wherein the parties agree to duties and obligations, a quasi-contract is created by the court and not by the parties. The term contract refers to a legal agreement that binds the parties with duties and obligations. The consenting parties agree to the conditions of the contract, either orally or in writing and such contracts are enforceable in a court of law. In order to be classified as a true valid contract, there must be an offer and acceptance between the parties for a valid and legal consideration. However, there is one type of contract, wherein these factors are not needed for its formation. There is no contract between the parties, till the court creates it. Quasi contracts, which are otherwise known as implied-in-law contract or an implied contract, are created by courts to prevent one party from getting unjust enrichment at the expense of the other (Nair, 2010).
Quasi contract is an arrangement created and enforced by a court to prevent one party from being unjustly enriched by another, in the absence of a valid contract between the parties. In short, when there is an absence of a contract, the court implies that there is a contract, which binds the parties (Nair, 2010). Consequently, quasi contract is a contract created by the law for reasons of justice, without any expression of assent and sometimes even against a clear expression of dissent. A quasi-contract is an obligation that the law creates in the absence of an agreement between the parties. It is invoked by the courts where unjust enrichment, which occurs when a person retains money or benefits that in all fairness belong to another, would exist without judicial relief. A quasi contract is a contract that exists by order of a court, not by agreement of the parties. Courts create quasi contracts to avoid the unjust enrichment of a party in a dispute over payment for a good or service. In some cases a party who has suffered a loss in a business relationship may not be able to recover for the loss without evidence of a contract or some legally recognised agreement. To avoid this unjust result, courts create a fictitious agreement where no legally enforceable agreement exists.
Quasi-contract (or implied-in-law contract) is a fictional contract created by courts for equitable, not contractual purposes. A quasi-contract is not an actual contract, but is a legal substitute for a contract formed to impose equity between two parties. The concept of a quasi-contract is that of a contract that should have been formed, even though in actuality it was not. It is used when a court finds it appropriate to create an obligation upon a non-contracting party to avoid injustice and to ensure fairness. It is invoked in circumstances of unjust enrichment, and is connected with the concept of restitution (Wikipedia, 2011). Quasi-contracts is a lawful and purely voluntary acts of a man, from which there results any obligation whatever to a third person, and sometime a reciprocal obligation between the parties. It “is not legitimately done, but the terms are accepted and followed as if there is a legitimate contract.
As stated in Lectric Law Library’s Lexicon (2011), a quasi-contract is the act of a person, permitted by law, by which he obligates himself towards another, or by which another binds himself to him, without any agreement between them. By the Civil Code of Louisiana, quasi-contracts are defined to be “the lawful and purely voluntary acts of a man, from which there results any obligation whatever to a third person, and sometime a reciprocal obligation between the parties.” In contracts, it is the consent of the contracting parties which produces the obligation; in quasi-contracts no consent is required, and the obligation arises from the law or natural equity, on the facts of the case. These acts are called quasi-contracts, because, without being contracts, they bind the parties as contracts do.
Quasi contract is an obligation created by law for reasons of justice and fairness. The doctrine of quasi contract is based upon the principle that a party must pay for a benefit he desired and received under circumstances that render it inequitable for him to retain it without making compensation (Business Dictionary, 2000). Quasi contracts sometimes are called implied-in-law contracts to distinguish them from implied-in-fact contracts. An implied-in-law contract is one that at least one of the parties did not intend to create but that should, in all fairness, be created by a court. An implied-in-fact contract is simply an unwritten, non-explicit contract that courts treat as an express written contract because the words and actions of the parties reflect a consensual transaction. The difference is subtle but not without practical effect.
One notable difference between the two implied contracts is that courts have no jurisdiction over quasi-contract claims against the government. Under the doctrine of sovereign immunity, the government cannot be sued without its consent. An implied-in-fact contract arises from an actual agreement that was not memorialised in writing, and if an agent of the government entered into an agreement, a court could find consent to sue on the part of the government. A quasi-contract claim, by contrast, does not allege that an agreement existed only that one should be imposed by the court to avoid an unjust result. Because a quasi-contract claim does not allege any consent on the part of the government, it would fail under the doctrine of sovereign immunity.
Quasi-contract may afford less recovery than an implied-in-fact contract. A contract implied in fact will construct the whole agreement as the parties intended, so the party seeking the creation of an implied contract may be entitled to expected profits as well as the cost of labour and materials. A quasi contract will be created only to the extent necessary to prevent unjust enrichment. As one court has put it, contracts implied in law are “merely remedies granted by the court to enforce equitable or moral obligations in spite of the lack of assent of the party to be charged” (Gray v. Rankin, 721 F. Supp 115 [S.D. Miss. 1989]). The amount of recovery for an implied-in-law contract usually is limited to the cost of labour and materials because it would be unfair to force a person who did not intend to enter into a contract to pay for profits.
Quasi contracts are made possible by the doctrine of quantum meruit (Latin for “as much as is deserved”), which allows courts to imply a contract where none exists. Quantum meruit includes implied-in-fact contracts as well as quasi contracts. Courts also use the term quantum meruit to describe the process of determining how much money the charging party may recover in an implied contract.
Liability: In general, the quasi contract doctrine is applied in disputes regarding payment of goods delivered or services rendered. If there is no valid contract between the parties, the main question that arises in such situations is the liability of the defendant. As the aim of this doctrine is to prevent unjust enrichment of one party at the expense of the other, the damages are usually restricted to the value of the services rendered or the cost of the materials delivered. In short, the liability of the party who has enjoyed unjust benefits is limited to the value of that benefit only. If the damages exceed that value, the whole concept of quasi contract will be defeated, as it will be unfair for the defendant.
Examples of quasi-contracts are: A painter, who mistakenly paints a house with the owner’s knowledge, can sue in court to get paid. A mechanic who fixes the brakes to a car as requested, but who also makes repairs to the axle (without which the brakes would not function properly), has an implied quasi-contract. For a casual job, there is almost never a written contract, but often a quasi-contract. A homebuilder who signs a contract with a purported agent, who actually has no authority, can recover the cost of the services and materials from the homeowner.
Here is another illustration: A is knocked down by a vehicle. B, a stranger, who found A on the road in an unconscious state, takes A to a doctor. C, the doctor, provides treatment to A, who is in an unconscious state. In such a situation there is no contract between A and C and A can claim that he is not liable to pay for the services offered by the doctor, as he was unconscious at the time of treatment and there is no agreement between the two. It is in such situations, the theory of a quasi-contract applies. In this case, the doctor (C) has spent his valuable time to treat the accident victim (A) and so, the doctor is liable to be paid by A for the services rendered by the former. If A fails to do so, the court can apply the doctrine of quasi contract and order A to pay C. This is to prevent the unjust enrichment of A at the expense of C. There is no contract between the parties to the dispute, but the court implies that there is a contract, according to which, the defendant has to pay for the services rendered by the plaintiff. The following paragraphs can give you more details about the concept of a quasi-contract (Nair, 2010).
Contract versus Quasi-contract
In contracts, it is the consent of the contracting parties which produces the obligation; in quasi-contracts no consent is required, and the obligation arises from the law or natural equity, on the facts of the case. These acts are called quasi-contracts, because, without being contracts, they bind the parties as contracts do. “A quasi-contract is not really a contract at all in the normal meaning of a contract,” according to one scholar, but rather is “an obligation imposed on a party to make things fair.”
The Oklahoma Supreme Court has described the distinction between a contract and a quasi-contract in T & S Inv. Co. v. Coury, 593 P.2d 503 (Okla. 1979), as follows:
A “quasi” or constructive contract is an implication of law. An “implied” contract is an implication of fact. In the former the contract is a mere fiction, imposed in order to adapt the case to a given remedy. In the latter, the contract is a fact legitimately inferred. In one the intention is disregarded; in the other, it is ascertained and enforced. In one, the duty defines the contract; in the other, the contract defines the duty. (Quoting from Berry v. Barbour, 279 P.2d 335, 338 (Okla. 1954)).
Quasi Contract and Implied-in-fact Contract
The characteristic feature of a quasi-contract is the absence of a contract or a mutual consent between the parties. Quasi contracts are often confused with implied-in-fact contracts. Implied-in-fact contracts are also not contracts in the true sense, as they lack a written agreement. In case of the latter, even though there is no contract between the parties as per the facts, the actions and words of the parties amount to mutual consent over the disputed matter. The difference between the two can be illustrated with an example. ‘A’ approaches a doctor for treatment. Here, there is a mutual consent between A and the doctor. As A expects treatment from the doctor, the doctor expects payment from A for his services. This is an example of implied-in-fact contract, wherein the conduct of the parties suggested a mutual consent. But, in a quasi-contract (as per the example given above), the parties to the dispute did not even know each other. So, there is no question of consent between them. In short, unlike normal contracts, in a quasi-contract, the obligation does not arise from a written legal agreement, but, from the facts of a particular case and the rules of equity. The obligation is created by a court, which assumes that there is a valid contract between the parties (Nair, 2010).
As stated in Lectric Law Library’s Lexicon (2011), quasi-contracts may be multiplied almost to infinity but could be divided into five classes: such “relate to the voluntary and spontaneous management of the affairs of another, without authority; the administration of tutorship; the management of common property; the acquisition of an inheritance; and the payment of a sum of money or other thing by mistake, when nothing was due.
a. Negotiorum gestio. When a man undertakes of his own accord to manage the affairs of another, the person assuming the agency contracts the tacit engagement to continue it, and complete it, until the owner shall be in a condition to attend to it himself. The obligation of such a person is:
- First, to act for the benefit of the absentee.
- Secondly, he is commonly answerable for the slightest neglect.
- Thirdly, he is bound to render an account of his management.
Equity obliges the proprietor, whose business has been well managed,
- First, to comply with the engagements contracted by the manager in his name.
- Secondly, to indemnify the manager in all the engagements he has contracted.
- Thirdly, to reimburse him all useful and necessary expenses.-
b. Tutorship or guardianship, is the second kind of quasi-contracts, there being no agreement between the tutor and minor.
c. When a person has the management of a common property owned by himself and others, not as partners, he is bound to account for the profits, and is entitled to be reimbursed for the expenses which he has sustained by virtue of the quasi-contract which is created by his act, called communio bonorum.
d. The fourth class is the aditio herreditatis, by which the heir is bound to pay the legatees, who cannot be said to have any contract with him or with the deceased.
e) Indebiti solutio, or the payment to one of what is not due to him, if made through any mistake in fact, or even in law, entitles him who made the payment to an action against the receiver for repayment, condictio indebiti. This action does not lie, 1. If the sum paid was due ex equitate, or by a natural obligation. 2. If he who made the payment; knew that nothing was due, for qui consulto dat quod non, debebat, proesumitur donare.
Lectric Law Library’s Lexicon (2011) stated further that each of these quasi-contracts has an affinity with some contract; thus the management of the affairs of another without authority, and tutorship, are compared to a mandate; the community of property, to a partnership; the acquisition of an inheritance, to a stipulation; and the payment of a thing which is not due, to a loan.
All persons, even infants and persons destitute of reason, who are consequently incapable of consent may be obliged by the quasi-contract, which results from the act of another, and may also oblige others in their favour; for it is not consent which forms these obligations; they are contracted by the act of another, without any act on our part. The use of reason is indeed required in the person whose act forms the quasi-contract, but it is not required in the person by whom or in whose favour the obligations which result from it is contracted. For instance, if a person undertakes the business of an infant or a lunatic; this is a quasi-contract, which obliges the infant or the lunatic to the person undertaking his affairs, for what he has beneficially expended, and reciprocally obliges the person to give an account of his administration or management.
Other types of contracts include (Law Dictionary):
- Bilateral contract is one in which there are mutual promises between two parties to the contract, each party being both a promisor and a promisee.
- Conditional contract is a contract, the performance of which depends on an operative fact (a fact or event that affects legal relations; it is a cause of some change in those legal relations). A contract, the performance of which depends on an event, not certain to occur, which must occur, unless its non-occurrence is excused before performance under the contract becomes due.
- Cost-plus contract is one where the total cost to the contractor represents the whole payment to be made to him, plus a stated percentage of profit, frequently used in government contracts and in situations where the production or construction costs are not presently determinable.
- Oral contract is one which is not in writing or which is not signed by the parties; “within the statute of frauds [it] is a real existing contract which lacks only the formal requirement of a memorandum [signed by the party to be charged] to render it enforceable in litigation.
- Output contract is where one promises to deliver his entire output to another and the other promises to accept the entire output supplied.
- Requirements contract is where one party agrees to purchase all his requirements of a particular product from another.
- Unilateral contract is one in which no promisor receives a promise as consideration for his promise; one-sided agreement whereby one makes a promise to do, or refrain from doing something in return for a performance not a promise.
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