Page 24 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Unit 1: Laws of Contract

Notes

Task X, an old lady, by a deed of gift, made over certain property to her daughter D,
with the specific directions that she should pay P, who is the sister of the old lady, a sum

of ` 100 per month. The same day D entered into an agreement with P to pay her the
agreed amount. D now refuses to pay her aunt P, the above amount on the plea that no
consideration had moved from P to D.P, therefore, sues D. Is the suit maintainable and
can D be held liable to pay the amount? [Hint. D can be held liable to pay the amount to P.
Consideration may move even from a stranger-s.2 (d)]

1.6 Quasi-contracts

We have seen above that one of the essentials of a valid contract is that it is based on an agreement
between the parties. Sometimes, however, obligations are imposed on a party by law (regardless
of any agreement), and an action is allowed to be brought by another party. Such obligations are
known as quasi-contracts, but the Act (Ss. 68-72) describes them as “certain relations resembling
those created by contract”.
1. Claim for necessaries supplied to a person incompetent to contract.
2. Reimbursement of money paid which was due by another

3. Obligation of person enjoying benefit of non gratuitous act (s 70)
4. Finder of lost goods (s 71)

Example: A, a tradesman, leaves goods at B’s warehouse by mistake. B treats the goods
as his own. B is bound to pay A for them.
They are remedies devised by the courts. Courts apply them when the legal requirements of
Indian Contract Act, 1872 for contract formation do not exist, but it would be grossly unjust to

permit one party to benefit – without paying – from what he received from the other.
A contract implied in fact is not expressly stated. Rather, a court, examining the facts and
circumstances, implies the existence of the contract from the acts or conduct of the parties. If
a tourist asks a garage owner to repair his car, a court will infer that the tourist agreed to pay
a reasonable amount, although neither party says anything about it. The parties may not have
thought consciously that they were forming a contractual relationship. Still, it is only common
sense that the tourist and the garage owner agreed to an exchange of services for money. And,
that is why the courts devised contracts implied in fact.
A contract implied at law, also called a quasi-contract, is an obligation imposed by a court to
do justice between the parties even though they never exchanged, or intended to exchange,
promises. In this instance, a court implies a contract to prevent one party’s unjust enrichment at
the other’s expense.

1.7 Agreements Declared Void (Secs.26-30)

The Act declares certain agreements to be void. Some of them (such as the following) have
already been explained:

(i) agreements entered into through a mutual mistake of fact between the parties (Sec.20);
(ii) agreements, the object or consideration of which is unlawful (Sec.23);
(iii) agreements, part of consideration of which is unlawful (Sec.24);
(iv) agreements made without consideration (Sec.25).

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