Showing posts with label Indian Contract Act 1872. Show all posts
Showing posts with label Indian Contract Act 1872. Show all posts

INTRODUCTION

A retroactive agreement between two parties who have no prior responsibilities to each other is known as a quasi-contract. It is made by the judge to fix a situation in which one party benefits at the expense of the other. This agreement is meant to keep one party from taking advantage of the situation at the expense of the other. If the goods or services are accepted but not sought by either party, these contracts can be imposed. Acceptance justifies the payment expectation. A quasi-contract outlines a party's responsibility to another if the latter owns the original party's property. These parties are not required to have previously agreed-upon terms. If Person ‘A’ owes something to Person ‘B’ because Person A indirectly or accidentally owes Person ‘B’, the agreement is imposed by law by the judge as a remedy. The contract becomes enforceable if Person ‘A’ decides to keep the thing in question without paying. The contract is legally enforceable because it was reached in court, and neither party needs to consent to it. The goal of quasi-contracts is to produce equitable outcomes in instances when one party has an advantage over the other. The defendant (the party that acquired the property) is obligated to pay the plaintiff, the aggrieved party, a return for the value of the items.[i]

 

QUASI CONTRACT EVOLUTION

The origins of quasi-contracts can be traced back to the Middle Ages when they were referred to as debt assumptions. During this time, the law compelled the plaintiff to get the amount determined by the court from the defendant, as if the defendant had always agreed to pay the plaintiff for the goods or services.

 

Courts utilized the Indebitatus assumpsit procedure to order one party to pay the other as though the two parties had signed a contract. The law inferred the defendant's willingness to be bound by a contract requiring compensation. Such contracts were utilized to enforce reimbursement obligations in the early days of quasi-contracts.[ii]

 

A QUASI-CONTRACT'S FEATURES

1.     It's usually the right to geta remedy, and it's usually (but not always) a monetary quantity.

2.      Rights are imposed by law rather than resulting from an agreement.

3.     The law does not apply to everyone in the world; rather, it only applies to certain individuals. As a result, it resembles a contractual right.[iii]

 

UNEQUITABLE ENRICHMENT

When parties are enriched without their consent, yet do not seek redress, this is known as unjust enrichment. Enrichment is a positive aspect of a person's life. [iv]A physical exertion is an option, but it is not required. Unjust enrichment can occur in a variety of settings. as an example:

 

·       The painter made the mistake of painting the wrong house. When a profit is made, the resident becomes wealthy. The resident will be unjustly rewarded if he or she decides not to compensate the painter.

 

·       Professional wedding planners can assist your friends with last-minute nuptials. She has gotten wealthy if her acquaintance accepts this assistance for her benefit. If the acquaintance refuses to pay for the service when it is billed, the acquaintance will be unjustly enriched.

 

·       A qualified doctor happens to pass by and saves her neighbor’s life by doing emergency surgery. Neighbors’ lives were enriched through emergency surgery. If the doctor then seeks formal invoice service and is not compensated, this is unjust enrichment. No one planned to provide the service in the example case, but it happened and brightened the lives of the receivers.

 

 

 

MERUIT IN QUANTUM

The Latin word quantum meruit refers to the Indian Contract Act, 1872. It means "what one earns" or "what one deserves." Simply expressed, it shows the true cost of the product or service given.

Although there is no formal contract, the law does require payment of reasonable compensation for the work and materials delivered.[v]

 

A QUASI-CONTRACT'S REQUIREMENTS

Various standards must be evaluated or granted by a judge for quasi-contracts.

·       One party must be in a disadvantageous position, and one party must be unfairly enriched.

·       Recipients of unjust enrichment must be aware of their situation and accept the benefits they have received.

·       The uncompensated party must show that there has been undue enrichment.

·       The exchange must be held until payment is received.

 

NECESSITIES (SECTION 68)

Section 68 says if a person has supplied any necessary/condition in life to any such incapable person or he was legally bound to support such incapable person then he may get reimbursement from the property of such incapable person to whom he supplied with necessaries.

If the incapable person doesn’t have any property, then the supplier will not be able to get reimbursement.

Reimbursements are permitted under Section 68 if the following conditions are met:

·       The items which have been supplied must be the condition in life or essential for survival.

·       People to whom necessaries have been supplied musthave impairments and be incapable of acquiring such necessities. Incompetency to the contract has been defined in section 11 of the Indian Contract Act.

·       The person should have a legal obligation to assist such disabled people

·       The reimbursements can only be gotten from the property of the incapable person. If the incapable person does not have any property, then the reimbursement cannot be demanded.

Not only the supplies should be necessary, but also, they must be important to support people in their living environments. It also relies on the person's condition and needs at the time when the goods in the name of necessaries are delivered.

Example: A person has supplied necessaries to an orphaned child such as shelter, food, clothing, etc, and also beard all the expenses for his education. Then, he can demand reimbursements from the property of the minor (if any).[vi]

 

PAYMENT BY AN INTERESTED PERSON (SECTION 69)

Those who want to pay money that others are legally obligated to pay and do so are entitled to recompense from others.

B, for example, rents Bengal land from A, the Zamindar. The income that A owes to the government is past due. As a result, the government put the land up for sale under tax legislation, resulting in the termination of B's lease. B pays the money that A should pay to the state to avert the sale. The amount paid to B must be refunded by A.

The following are the terms of Section 69 liability:

·       The plaintiffs are willing to pay. He doesn't require formal ownership of the land in exchange for payment. It is, nevertheless, frequently used to determine whether a plaintiff is interested.

·       Section 69 prohibits the court from restricting that a person who is uninterested in property may be interested in paying for it.

·       Defendants should not be forced to pay. He should only be concerned with making payments to safeguard his interests.

·       The defendants must be legally bound to make restitution.

·       Instead of paying himself, the plaintiff should have paid someone else.

 

SECTION 70- PAYMENT OBLIGATIONS FOR NON-GRATUITOUS ACTIVITIES

When one person performs something lawfully for another person, donates something to another person with interest without the aim of doing it for free, or another person benefits from it. What was done or given must be paid or refunded by the latter.

Example: Whenever some person donates anything to the poor, he has no intention of doing this with charge. Hence, this act will be said to be done gratuitously and he cannot demand any compensation for the same. But, whenever supplies have been given non-gratuitously and the supply was lawful, one can get the compensation.

The following three elements must be completed before asserting the right to a proceeding under Section 70.

1.     The act must be permissible under the law.

2.     The act should not have been done gratuitously by the person.

3.     Those who act must have reaped the benefits.

For example, the village's irrigation tank was renovated by the government. Zamindars have been indirectly rewarded for such efforts of renovating the irrigation tanks by the government because now the water of the irrigation tank will be reaching the zamindars' land also. Then, the zamindars are liable to compensate the government for the same.[vii]

 

SECTION 71- RESPONSIBILITIES OF THE ITEM FINDER

When it comes to locating and managinglost assets that belong to others, the following criteria should be observed.

1.      Take care of things as if you were the legal owner.

2.      There is no legal right to deliver the object that has been already located.

3.     Ensure that the item is returned to its rightful owner.

For example, Karthik owns and operates anelectronic shop. Ankita went to buy a laptop from him, but she left her wallet at the store. Unfortunately, Karthik is unable to authenticate her identity using the documents in her suitcase. Karthik places her wallet on the cash register and waits for her to return. Karthik clerk Ajay discovers a wallet on the counter and places it in the closet without informing Karthik. He completes his duties and returns home. When Karthik arrives, he is unable to locate Ankita's wallet. He is responsible for damages because he did not treat the wallet with the care that a reasonable person would.[viii]

SECTION 72 (LIABILITY OF PERSON TO WHOM MONEY IS PAID OR THING DELIVERED BY MISTAKE OR UNDER COERCION)

When someone receives something as a result of "extortion," they must repay it.

For example, Navrana and Rajkumar, share an apartment and split rent payments in half. Navrana has paid the landlord again, even though Rajkumar has already paid the full amount of the rent. The landlord is liable for restoring the money provided by the renter in this situation.[ix]

 

THE DIFFERENCE BETWEEN A CONTRACT AND A QUASI-CONTRACT IS AS FOLLOWS:

A quasi-contract can be thought of as either a legal or a constructive contract. This is effectively a made-up contract intended to provide relief to the offending party, rather than an actual contract. The parties' intent will be not taken into account in the case of a quasi-contract. In an explicit contract, on the other hand, the parties' intent is crucial because there is no contract unless the parties intend to enter into one. The parties' obligations define the contract and form the terms of the contract in an explicit contract. In the case of a quasi-contract, however, the duty emerges from the contract's evolution.[x]

 

CONCLUSION

The quasi-contract concept is frequently overlooked, yet it nevertheless holds a significant position because it is founded on the values of justice and impartiality. Even though in Indian contract law, quasi-contracts have a new name, however, the principle's basic character and substance have not changed significantly. Quantum revenue is a concept used in the context of quasi-contracts. This determines the extent of the plaintiff's pain. If someone breaks the contract on purpose, the chances of the quasi-contract being used are slim. If the employee intentionally violates the contract, however, this form of penalty is frequently less severe. The quasi-contract is an important aspect of contract law, and the aggrieved will get compensation if someone is unjustly benefited as a result of it.

This blog is authored by JAY KUMAR GUPTA, a student of School of Law, NMIMS Bangalore, currently in the first-year pursuing BBA LL.B.(Hons.)


REFERENCES


INTRODUCTION

The Indian Contract Act of 1872, which is the most important piece of legislation controlling Indian contract law, established the law governing contracts in India. The Act is based on the ideas of English common law. A false claim, active concealment, vow without the purpose to carry it out, any other deceptive act, or any act ruled fraudulent are all listed in Section 17 as activities that constitute fraud. Any of the following conduct undertaken by a constricting party, his collusion, or his agent to deceive or persuade another party or his agent to agree is considered fraud. A decree is a plant that has been obtained through deception, and the operation has moved in a delinquent manner. The court possesses the necessary authority to give relief in such a case, and res judicata rules would not apply. Indeed, innocent misrepresentation may be grounds for a claim of fraud relief. A contract that is voidable under Section 19 is reached by deceit. Even yet, even silence is enough to establish that deception has occurred. If the court is willing to "verify" substantiation, it means the information has been disclosed. The defendant's wicked or felonious purpose can be proven based on the evidence and circumstances of the case. The punishment for fraud is non-compoundable because it includes both a fine and imprisonment. Online fraud has increased as technology has advanced, and committing fraud has recently become a serious crime in the eyes of the law. However, if the agreement was obtained or forced by compulsion, there was undue influence or fraud.

 

FRAUD

 

"Any of the following activities undertaken by a contracting party, his connivance, or his agent to trick or persuade another party, or his agent, to join into the agreement are considered fraud."

Someone who knows or believes a fact deliberately caches it. There was a promise made with no intention of keeping it. Any other behavior that is intended to deceive. Any act or omission that the law has expressly labeled fraudulent. Confidentiality on material likely to influence a person's desire to enter into a contract isn't fraud unless the conditions of the case are comparable enough that it's the person remaining silent's job to speak, or unless his silence is unique to speaking. To be regarded fraudulent, the contractual party, or any other individual with whom he colluded, or his agent, must have subjected him to similar conditioning to persuade him to enter the agreement. The parties have no obligation to communicate about data that could affect the other party's agreement to the contract, and merely remaining silent does not constitute fraud unless the circumstances of the case produce a duty to speak or silence similar to speech.

DIFFERENCE BETWEEN FRAUD AND MISREPRESENTATION

The crucial distinction between fraud and misrepresentation is that in the first case, the person making the suggestion doesn’t believe it's true, whereas in the alternate case, he believes it's true, even though in both cases, the pledge is misled by a misrepresentation of the verity. Rattan Lal Ahluwalia v. Jai Janider Parshad was the case. Under common law, fraud not only makes the contract voidable at the discretion of the person whose assent was attained by deception, but it also gives rise to a claim for damages for deception.

CONSTITUENTS OF FRAUD?

The Constituents of Fraud are as follows:

ACTIVE CONCEALMENT

When one party declines to disclose material contract information despite having a legal obligation to do so, this is known as active concealment. It necessitates more than ineffective concealing; it necessitates a deliberate act of concealment. It's vital to note that the previously described unresistant caching relates to silence. While bare silence does not constitute fraud, it may do so when the person should communicate or when silence is equal to speech, according to the provision.

PROMISE WITHOUT INTENTION OF EXECUTING IT

Pledging without intending to keep it's considered fraud. To fall under this section, it must be demonstrated that the pledge had no intention of carrying out the pledge at the time it was made, and any after conduct or representation isn't taken into account.

ESTABLISHING FACTS WITHOUT BEING CONVINCED OF THEIR ACCURACY

To prove that a claim was made with the knowledge of the person making it, it must be shown that the statements were untrue. The assertion must be false in both substance and fact. In Jewson & Sons Ltd v. Arcos Ltd, giving a deceptive print and urging someone to act on it constituted fraud, even if each verity was physically true.

RECKLESS AND AMBIGUOUS STATEMENTS

Whether the representation is made recklessly or intentionally, evidence of the absence of factual and honest belief is all that is required to establish the reality of fraud; inquisitiveness or recklessness on the part of the represented as to the verity or falsity of the representation only serves to illustrate the lack of similar belief. When a statement is ambiguous, the person to whom it is made must prove that he misinterpreted it. If the representative meant the statement to be understood that way, rather than if he truly feels it is accurate but the person relying on it does not, he will be accused of fraud.

WHEN IS SILENCE CONSIDERED AS A FRAUD?

The duty to communicate occurs when one party places their trust and confidence in the other and the other party accepts that trust. The duty to communicate may also apply in the context of a contract, where one party lacks the resources to investigate the truth and must rely on the information provided by the other. Silence can be used as a cover for words in some situations. A person is inversely liable for fraud if he or she maintains silent despite knowing that their silence is dishonest. Although a statement may be true at the time it is uttered, it may become incorrect when it is acted upon by the other person owing to a change in circumstances. Whenever a person shares a commodity, whether or not it is his job to speak, he must reveal all information. Contracts are voidable under Section 19 in the absence of free consent. In this scenario, silence or deception must fall under the definition of fraud as defined in Section 17.

CASES WHERE THERE IS NO FRAUD

Indeed if a false statement was made, the party professing fraud couldn't be supposed to have been duped if it had the data in front of it or could know them. The partition of property on the death of the father and mother wasn’t set away in Janakiamma v. Raveendra Menon because the complainant was apprehensive of the vittles of her father's Will and no new partition was ordered. In the vast maturity of cases, fraud can not be proven with positive and concrete substantiation.

REMEDIES AVAILABLE FOR FRAUD

Even if restitutio in integrum is not possible, as, in Indranath Banerjee v. Rooke, such a suit would provide a remedy. Due to the opposing party's distortion of facts, the plaintiff in Dambarudhar Behera v. the State of Orissa cancels the contract. The plaintiff demanded compensation for expenses incurred during the contract's drafting as well as lost wages until the deception was discovered. The Court awarded him damages, stating that the number of damages awarded for false misrepresentation shouldn't exceed the losses that would have passed if the data hadn't been misrepresented. In the event of a quiet fraud, the complainant has two options the complainant has the right to repudiate, terminate, the contract and seek payment for his losses or confirm the contract and train an action against the defendant for damages. The defendant's malignant or felonious intent can be proven depending on the data and circumstances of the case. The defendant can also face felonious proceedings, which might affect forfeitures or maybe a captivity judgment for the defendant.

PUNISHMENT FOR COMMITTING FRAUD

The punishment for fraud is non-compoundable because it includes both a fine and imprisonment. Online fraud has increased as technology has advanced, and perpetrating fraud has become a serious crime in the eyes of the law. If an existent is found guilty of fraud under Section 447, he can be sentenced to prison for a period ranging from six months to ten years. He will also face forfeitures ranging from the amount engaged in the fraud to three times the amount involved in the fraud. If the circumstances of the fraud are detrimental to the public interest, the perpetrator might be sentenced to a minimum of three years in jail.

CONCLUSION

As a result, being unaware of some material information that affects a person's decision to engage in a contract does not constitute fraud. Silence, on the other hand, may be considered fraud if it can be proved as speech or if the existing must inform the other party of the information. Silence can lead to fraud if one person declines to disclose relevant information, causing harm to the other. Frauds committed all around the world could be the outcome of a dire financial situation. The penalty for fraud is now low, and it should be increased to instill a moral heart in residents so that they are not deceived by the benefits of deception. The general public should be apprehensive of common swindles and should double-check whether the information handed by the party is accurate. Fraud elimination doesn't be overnight, and society as a total must pay the price.

This blog is authored by Dakshita Dhage, a Student of Maharashtra National Law University, Nagpur.

ENDNOTES

1.     THE INDIAN CONTRACT ACT, 1872 <https://legislative.gov.in › sites › default › files>

2.     Avtar Singh, Contract and Specific Relief, 12th Ed (2020)

3.     www.gtlaw.com

4.     www.mondaq.com

5.     https://indiankanoon.org/doc/353998/

6.     Rattan Lal Ahluwalia vs Jai Janinder Parshad on 27 October, 1975 AIR 1976 P H 200

7.     JEWSON & SONS, LTD. v. ARCOS, LTD. (1933) 47 Ll.L.Rep. 93

8.     Janaki Amma And Ors. vs Raveendra Menon And Ors. on 3 June, 1981 AIR 1981 Ker 205

9.     Indra Nath Banerji vs E.G. Rooke on 2 August, 1909 3 Ind Cas 316

10.  Dambarudhar Behera vs State Of Orissa And Ors. on 14 May, 1980 AIR 1980 Ori 188

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INTRODUCTION

In the twenty-first century, tremendous growth and development have taken in trade and commerce. With the development of trade and commerce, a combination of different principles is used to fix the rights and obligations of the parties involved. In India, the rights and obligations of the parties involved in such a contract related to commercial law are laid down in The Indian Contract Act, 1872. It also lays down the legal remedies available to the aggrieved parties entered into the contracts. Any party failing to honor its part of the agreement could be actioned upon due to a binding contract. Hence they give a legal framework for the formation and execution of a contract in India. There are two types of contracts- valid and invalid.

S. 10 of the ICA, 1872 provides for the constituents of a valid contract. An invalid contract may be of two sub-types, void and voidable. It hence becomes important to know the comparison between the two.

VOID CONTRACT

A void contract is not valid. Section 2 (g) of the act, 1872 says defines void.Thus, a void agreement is null from its beginning and no rights are conferred upon parties.As the parties are not bound by the terms of void contract, any of the parties cannot be sued due to the breach of contract and no remedy is available in such a case.

WHAT MAKES A CONTRACT VOID?

A void contract means that the contract has no power or effect, so no party is bound by it and no party can rely on it. Usually, this is because:

·         The purpose of the agreement is illegal or contrary to public policy (illegal consideration or topic)

·         The terms of the agreement are unlikely to be fulfilled or unclear to be understood

·         There was a lack of consideration

·         Fraud (i.e. false representation of facts)

Relevant legal provisions

1.      Mistake of Fact (Section 20) -

This provision states that if the contracting parties are under a mistake of fact (matter of fact) important to the agreement, it is void due to bilateral mistake.

2.      Mistake of law (Sections 23 & 24) -

If the consideration or object of the contract is illegal, then the agreement does not apply as it defeats the provisions of the law. This applies to contracts that the court may consider unethical or in conflict with public policy, such as fraudulent agreements, which may result in financial loss to a person. However, if the legal part of the contract is separated from the illegal part, then the legal part can be enforced in a court of law.

3.      Agreements without Consideration (Section 25) -

This section provides that the contract without consideration will be void unless it is a gift made out of natural affection; it is a debt.

4.      Agreement in restraint of-

·         Marriage (Section 26)

·         Trade (Section 27)

·         Legal proceedings (Section 28)

 

5.      Impossibility/Uncertainty of performance (Section 29, 30, 36)

These sections provide that the agreement, the terms of which are uncertain, based on uncertain events, or based on impossibility, does not apply except in certain circumstances such as that of horse racing.

CASE LAW[i]- Collins v Godefroy[1]

VOIDABLE CONTRACT

Voidable contracts are legal and enforceable in courts.  Section 2 (i) of the act gives light on voidable contracts. One or both parties may terminate the contract at any time under normal circumstances. Contract enforceability is void when one person is minor and not capable to enter into a contract. This is always the case when one does not have the mental capacity to enter into an agreement. Others are simply void if one of the parties did not enter with free will or consent, be deceived, or coerced. Incapacity does not provide for a voidable contract, and if the courts find this, such contract becomes null and void.

WHAT MAKES A CONTRACT VOIDABLE?

Voidable contract binds only one party; the other party may choose to reject or accept it. A contract becomes voidable under various circumstances, including:

• The party was forcing or threatening another party to sign the agreement

• One party had undue influence (one party controlled the will of the other)

• Mistakes in the contract affect whether one or both individuals can fulfill their obligations

• The party violates the terms of the agreement

Relevant legal provisions

1.      Lack of free consent (Sections 19 and 19-A)

2.      Preventing from performing the obligation (Section 53)

Reciprocal promise based contracts and situations where and one of the parties prevents the other from fulfilling its obligations under the contract makes it voidable.

3.      Non- performance by other parties within time period (Section 55)

4.      Consequences of cancellation (Section 64)

When a party rescinds a contract no obligations are required to be performed while the other party must be fulfilled with the benefits which according to the contract must be received.

CASE LAW[ii]-Bawlf Grain Co. v. Ross[2]

DIFFERENCE BETWEEN VOID AND VOIDABLE CONTRACTS

With a void contract, it does not work from the beginning. In this case, no party can enforce a void contract as it is considered that the contract has never existed. With a contract voidable, it is not invalid until one party submits a valid reason to revoke or cancel it. Thus until any legal objection is raised by any of the parties, the contract may remain in force.

If one party uses a strategy such as fraud or coercion, the contract will become voidable. With a void contract, the contract cannot be operated solely by both parties’ consent to the agreement, as you cannot commit any illegal activity. Voidable contracts may be enforced if the parties agree to give up their redemptive rights.

Few instances of void contracts can be prostitution or gambling. If a person enters into an agreement and is suffering from a serious illness or mental illness, it will be in vain because the party did not have the legal capacity to enter into the contract.

CONCLUSION

The provisions of sections relating to void and voidable contracts under Indian Contract Law are not only simple but have great clarity as well. The fact that this law applies to this day, without the need for amendment stands as proof of its nature. It takes a defensive approach to contract law in the sense that it protects people from fulfilling irrational, illegal, and immoral obligations. The provisions surrounding void and voidable contracts may provide for a non-binding agreement, thus rendering it invalid. Legislation on this issue strikes a balance between the flexibility and severity of its application as it can be consistent with the facts of the case while maintaining its terms and conditions.

 

This blog is authored by Aditi Vishnoi, a student of The ICFAI University, Dehradun.



[1](1831) 1 B & Ad 950; 109 ER 1040.

[2](1917) 57 S.C.R 232.