Quasi-Contracts — Sections 68–72

Sections 68 to 72 of the Indian Contract Act, 1872 sit in Chapter V under the deliberately cautious heading ‘Of Certain Relations Resembling Those Created by Contract’. These five sections are not contracts at all. They are obligations the law fastens onto a party — without offer, without acceptance, without consideration — to prevent one person retaining a benefit that in conscience belongs to another. The doctrinal label is ‘quasi-contract’ and the underlying principle, traceable to Lord Mansfield in Moses v. Macferlan and reaffirmed by Lord Wright in Fibrosa v. Fairbairn, is unjust enrichment. The chapter is a regular recurrence in judicial-services papers and in every serious reading of the Indian Contract Act.

The exam-line opens with a warning. Quasi-contracts are not a special kind of contract. They are obligations imposed by law that operate exactly when no contract subsists. The Privy Council in Mohori Bibee v. Dharmodas Ghose (1903) 30 IA 114 established that the question of void or voidable presupposes a contract — which a minor’s agreement is not — and Section 68 was designed precisely for that gap. The same architecture runs through Sections 69, 70, 71 and 72. Each section answers a different fact-pattern, but the through-line is constant: no contract, no consent, yet a benefit retained that justice requires be returned.

Statutory anchor and scheme

Chapter V opens at Section 68 and runs through Section 72. The five sections cover, in order, (i) necessaries supplied to a person incapable of contracting; (ii) reimbursement of a person who has paid money the law obliged the other party to pay; (iii) compensation for a non-gratuitous act done for another; (iv) the finder of goods; and (v) restitution of money paid or things delivered by mistake or under coercion. The Supreme Court in State of West Bengal v. B.K. Mondal & Sons AIR 1962 SC 779 placed the entire chapter outside contract proper — these obligations, the Court held, do not arise from any subsisting contract but from a third category of law, and they presuppose the absence of a contract.

Section 68 — necessaries supplied to a person incapable of contracting

The text reads: ‘If a person, incapable of entering into a contract, or any one whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.’ Three points govern. First, no personal liability arises against the minor or incompetent — recovery is only from the property of the person. Second, the supplies must be ‘necessaries’ judged by the recipient’s station in life, not by abstract need. Third, the section operates because of the gap left open by the rule in Mohori Bibee: a minor’s agreement being void from the start, the supplier of necessaries cannot sue on contract and would be without remedy unless the law created one. Section 68 supplies that remedy. The doctrinal connection to capacity to contract is unbroken — Sections 11 and 12 disable the minor and the unsound; Section 68 protects the supplier who acted bona fide.

Section 69 — payment by an interested party

Section 69 reads: ‘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 the other.’ The classic instance is the lessee who pays municipal arrears that the landlord was bound to discharge, to save the lease from sale; or the mortgagee who clears land revenue the mortgagor was bound to pay. Three ingredients are tested in every fact-pattern: the plaintiff must be interested in making the payment, the defendant must be the person bound by law to pay, and the payment must actually have been made. The provision rests on the same restitutionary logic as the rest of the chapter — but unlike Section 70, it requires a legal obligation on the defendant, not a mere benefit conferred.

Section 70 — compensation for a non-gratuitous act

Section 70 reads: ‘Where 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 thing so done or delivered.’ This is the most-litigated of the five sections and the most exam-relevant.

Three statutory requirements

1. The act must be lawful — the word ‘lawfully’ is not surplusage; it requires that the doing or delivery not be fraudulent, dishonest, or in violation of statute.
2. The act must not be intended as a gift — the doer must not have meant to act gratuitously.
3. The other person must have enjoyed the benefit — and the enjoyment must be voluntary, with the option to reject having been available.

State of West Bengal v. B.K. Mondal & Sons

The leading authority is State of West Bengal v. B.K. Mondal & Sons AIR 1962 SC 779. B.K. Mondal & Sons constructed temporary godowns and other structures at Arambagh on the request of the Sub-Divisional Officer of the Civil Supplies Department. The State took possession and used the structures. No contract had been executed in the form required by Section 175(3) of the Government of India Act, 1935. The State refused payment, contending that the absence of a properly executed contract barred any claim. The Supreme Court held that Section 70 applied. The Court parsed each requirement of the section. ‘Lawfully’, the Court held, meant that the thing delivered or done must not be delivered or done fraudulently or dishonestly nor must it be delivered or done gratuitously. Section 70, the Court continued, is not intended to entertain claims for compensation made by persons who officiously interfere with the affairs of another or who impose on others services not desired by them. The acceptance and enjoyment of the thing delivered or done — which is the basis for the claim under Section 70 — must be voluntary. The State had the option to reject the structures and demand their removal; instead, it accepted possession and used them. Section 70 therefore applied and the State was liable to pay compensation.

Mulamchand v. State of M.P.

The principle was reaffirmed in Mulamchand v. State of M.P. AIR 1968 SC 1218. Mulamchand had paid Rs 10,000 for the right to collect forest produce from government forests. The contract had not been executed under Article 299 of the Constitution. The Supreme Court held that the constitutional formality of Article 299(1) had not been enacted for mere form but for protection of the public — it could not be waived. Where, however, money is deposited or services rendered under a void contract and the conditions of Section 70 are otherwise satisfied, the section can be invoked. The juristic basis of the obligation, the Court emphasised, is not founded on any contract or tort but upon a third category of law — quasi-contract or restitution. The decision is a permanent fixture of every quasi-contract syllabus and of the public-policy doctrine on government contracting.

The Sugar Mills containers case

A further illustration: in Mahabir Kishore v. State of M.P. AIR 1990 SC 313 the Court applied Section 70 where containers had been retained by a buyer though the containers were not part of the underlying supply contract. The retainer was bound to pay the price of the containers under Section 70 — the buyer had had the option to reject them and chose not to.

Section 71 — finder of goods

Section 71 reads: ‘A person who finds goods belonging to another, and takes them into his custody, is subject to the same responsibility as a bailee.’ The finder is treated by law as a quasi-bailee. He must take reasonable care of the goods, must not use them for his own purpose, must take steps to find the true owner, and may sell the goods in narrow circumstances under the conditions set out in Sections 168 and 169 of the Act. The section bridges quasi-contract and the law of bailment: the finder, although he has not contracted with the owner, is fastened with the duties of a bailee because the law refuses to leave the owner without a remedy and refuses to leave the finder unregulated.

Section 72 — money paid or thing delivered by mistake or under coercion

Section 72 reads: ‘A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it.’ The reach of the section is wide. ‘Mistake’ in Section 72 has been read by the Supreme Court to include both mistake of fact and mistake of law — a departure from the older English-law restriction. The section has had its richest application in the field of taxation, where the State has either levied a tax without authority or collected more tax than was due.

Mahabir Kishore v. State of M.P. — taxation under coercion

In Mahabir Kishore v. State of M.P. AIR 1990 SC 313, the State of Madhya Pradesh continued to levy a charge after the High Court had declared it invalid. The Supreme Court invoked the unjust-enrichment foundation of Section 72: ‘No one ought to enrich himself at the expense of others. The doctrine of unjust enrichment is that in certain situations it would be unjust to allow the defendant to retain a benefit at the plaintiff’s expense.’ The Court identified the three elements: enrichment of the defendant by receipt of a benefit; that enrichment at the expense of the plaintiff; and that retention of the enrichment be unjust. Once the elements are established, restitution follows. Section 72, the Court added, applies to everyone — including the State.

Mafatlal Industries — the passing-on defence

The position was qualified in Mafatlal Industries Ltd. v. Union of India (1997) 5 SCC 539 and reiterated in Sahakari Khand Udyog Mandal Ltd. v. Commissioner of Central Excise and Customs AIR 2005 SC 1897. Where the assessee has passed on the incidence of the tax to a third party — typically the consumer — the assessee has not suffered loss and cannot claim restitution. The very basic requirement for a claim of restitution under Section 72, the Court held, is that the person claiming restitution should plead and prove a loss or injury — in other words, that he has not passed on the liability. This is the ‘passing-on’ defence and it is a fixture of indirect-tax litigation in India.

Distinction from contract — what quasi-contract is not

Quasi-contractual obligations are not contracts. They do not arise from offer and acceptance, do not require consideration, do not depend on free consent, and are not subject to the doctrine of frustration. They are imposed by law to prevent unjust retention of a benefit. The remedies available reflect this: a claim under Section 70, for instance, is not for damages for breach of contract — there is no contract to breach — but for compensation for the value of the benefit conferred. Section 70 cannot be the basis for specific performance, nor for damages calculated under Sections 73 to 75. The Supreme Court in B.K. Mondal emphasised this in terms: a claim under Section 70 is not on any subsisting contract; it is on the basis that something was done by the party for another and that work has been voluntarily accepted.

Distinction from Sections 64 and 65

Quasi-contractual sections are also distinct from the restitution rules in Sections 64 and 65. Section 64 deals with restitution when a voidable contract is rescinded. Section 65 deals with restitution when an agreement is discovered to be void or a contract becomes void. Sections 64 and 65 presuppose, in some sense, an attempt at a contractual relationship between the parties. Sections 68 to 72 do not — they apply where no such relationship subsists. The classification matters: under Sections 64 and 65, restitution is owed because the contractual base has fallen away; under Sections 68 to 72, restitution is owed because the law refuses to permit unjust enrichment from the start.

The English foundation — Lord Mansfield and Lord Wright

The doctrinal pedigree is English. Lord Mansfield in Moses v. Macferlan (1760) framed the action for money had and received as an action ‘in the nature of a bill in equity’ to recover money paid where the defendant in conscience could not retain it. The Privy Council and the House of Lords developed the principle through cases such as Sinclair v. Brougham and Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. (1943) AC 32, where Lord Wright restated the doctrine: any civilised system of law is bound to provide remedies for cases of unjust enrichment — to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep. Indian courts have adopted the principle but anchored it firmly to the statutory text. As the Supreme Court observed in Mahabir Kishore: ‘Our law having been codified, we have to apply the law.’

Practice angle — what the plaintiff must plead and prove

Each section calls for distinct pleading. Under Section 68, the plaintiff pleads incapacity of the defendant, the supply of necessaries suited to the defendant’s condition, and seeks recovery from the defendant’s property. Under Section 69, the plaintiff pleads his interest in making the payment, the defendant’s legal obligation to make it, and the actual payment. Under Section 70, the plaintiff pleads the lawful act, the absence of a gratuitous intent, and the defendant’s voluntary enjoyment of the benefit. Under Section 71, the plaintiff (the true owner) sues the finder for breach of the bailee-equivalent duties. Under Section 72, the plaintiff pleads payment under mistake or coercion and the defendant’s retention of the sum or thing. Limitation runs under Article 24 of the Limitation Act, 1963 for restitution claims — three years from the date the right to restitution accrues — though Section 72 tax-refund claims have their own jurisprudential complexity through the Mafatlal line.

Exam-angle distinctions

1. Quasi-contract is not a contract. The single most-tested point. Avoid the formula ‘a special kind of contract’; the obligation arises by operation of law, not by consensus.
2. Section 70 vs Section 69. Section 69 requires a legal obligation on the defendant; Section 70 requires only that the defendant voluntarily enjoy a benefit conferred non-gratuitously.
3. Section 70 and the State. The Article 299 / Section 175(3) bar on unexecuted government contracts does not block Section 70 — B.K. Mondal and Mulamchand both confirm that Section 70 applies precisely where the contractual route has failed.
4. Section 72 and mistake of law. Indian law extends Section 72 to mistake of law, departing from the older English position. The Mahabir Kishore line is the key authority.
5. Passing-on defence. Section 72 does not assist a claimant who has passed on the burden — Mafatlal Industries.
6. Section 71 and bailment. The finder is a quasi-bailee. The connection to pledge and bailment doctrines matters because the same duties of reasonable care, segregation, and accounting apply.

Quasi-contracts are short — five sections only — but they sit at the doctrinal crossroads of contract law, restitution, public law and tax. The aspirant who can hold the through-line — that the law imposes the obligation precisely because the consensual route has failed — and who can deploy B.K. Mondal, Mulamchand, Mahabir Kishore and Mafatlal Industries at the right fact-patterns has covered the chapter.

Frequently asked questions

Are quasi-contracts a special kind of contract?

No. Quasi-contracts are not contracts at all. They are obligations imposed by law to prevent unjust enrichment, and they operate precisely when no contract subsists between the parties. The Supreme Court in State of West Bengal v. B.K. Mondal & Sons AIR 1962 SC 779 placed Sections 68 to 72 of the Indian Contract Act outside contract proper, holding that they deal with rights and liabilities accruing from relations which resemble those created by contract. The Court reiterated this in Mulamchand v. State of M.P. AIR 1968 SC 1218 — the juristic basis of quasi-contractual obligation is a third category of law, neither contract nor tort.

What are the requirements of a Section 70 claim?

Three requirements. First, the act must be done lawfully — not fraudulently, not dishonestly, and not in violation of statute. Second, the act must not be intended as a gift; the doer must show he did not act gratuitously. Third, the other person must have voluntarily enjoyed the benefit, with the option to reject having been available to him. The Supreme Court in B.K. Mondal AIR 1962 SC 779 emphasised the voluntary-acceptance element: where the defendant could have rejected the benefit and chose to accept, Section 70 fastens the obligation to compensate. Officious interference does not qualify.

Can Section 70 be invoked against the Government when no contract has been executed under Article 299?

Yes. The constitutional formality of Article 299(1) of the Constitution — and its predecessor, Section 175(3) of the Government of India Act, 1935 — has not been enacted for mere form but for the protection of the public, and it cannot be waived. Where, however, money is deposited or services rendered under a void or unexecuted contract and the conditions of Section 70 are otherwise satisfied, Section 70 can be invoked. This was settled in Mulamchand v. State of M.P. AIR 1968 SC 1218 and earlier in B.K. Mondal. The State accepted and used the benefit; that is sufficient.

Does Section 72 cover mistake of law as well as mistake of fact?

Yes. Indian courts have read ‘mistake’ in Section 72 to include both mistake of fact and mistake of law, departing from the older English-law restriction. The leading authority is Mahabir Kishore v. State of M.P. AIR 1990 SC 313, where the Supreme Court applied Section 72 to recover a charge levied by the State after the High Court had declared the levy invalid. The Court anchored Section 72 to the unjust-enrichment principle: enrichment of the defendant, at the expense of the plaintiff, the retention of which would be unjust. Section 72 applies to everyone, including the State.

What is the passing-on defence under Section 72?

Where an assessee has passed on the incidence of an unauthorised or excess tax to a third party — typically the consumer — she has not suffered loss and cannot claim restitution under Section 72 of the Indian Contract Act. The Supreme Court in Mafatlal Industries Ltd. v. Union of India (1997) 5 SCC 539 and again in Sahakari Khand Udyog Mandal Ltd. v. CCE AIR 2005 SC 1897 held that the basic requirement of a Section 72 claim is loss or injury to the claimant; the claimant must plead and prove that the burden was not passed on. The defence is now standard in indirect-tax refund litigation.