What is a quasi contract?
What are some examples of quasi contracts?
What is the difference between a quasi-contract and a contract?
In this article, we will break down the notion of quasi contract so you know all there is to know about it.
We will first go over what it means, understand what quasi contracts or implied-in-law contract means, look at some concrete examples, define its elements and more.
Are you ready?
Let’s get started!
What is a quasi contract?
A quasi contract is an obligation imposed by law to prevent a person from taking advantage of another or unjust enrichment.
A quasi contract is an obligation created by a judge or by the operation of the law on a person in favour of another even though the parties did not enter into a contractual relationship.
The creation of a quasi contract is irrespective of the intention of the parties to enter into a contract or not.
Quasi contracts come from the common law jurisdictions going back to the Middle Ages.
Back then, a person could take an indebitatus assumpsit action against another representing a legal principle whereby a person was held indebted or accountable to another as if they had entered into a contract.
Based on the indebitatus assumpsit doctrine, a person would be indebted to another if he or she had promised to make a payment.
When a person promised payment, the court considered a contract-like obligation existed even though the parties had not entered into a contract.
Obligation imposed in law
“Quasi contracts” are also called “implied-in-law contracts” or “constructive contracts”.
What’s important to note with a quasi contract is that a court can presume the existence of a quasi contract only when an express or implied in fact contract does not exist.
An express contract is when the parties have entered into a binding contract.
An implied in fact contract is a legally binding contract implied by the actions of the parties, their behaviour and the circumstances.
For example, a quasi contract may be imposed in law is when a person comes into possession of another’s property either by mistake or due to the circumstances and decides to keep it without paying for it.
As a form of equitable judicial remedy, the court can impose a quasi contract in law to remedy the injustice from the enrichment of a person at the expense of another by keeping property they did not legally purchase.
Quasi contract definition
According to Investopedia, a quasi contract is defined as follows:
“A quasi contract is a retroactive arrangement between two parties who have no previous obligations to one another. It is created by a judge to correct a circumstance in which one party acquires something at the expense of the other.”
In other words, a court steps in between two parties without a contractual relationship and imposes certain duties and obligations on one party or the other to correct inequalities or prevent unjust enrichment.
You can consider a quasi contract to be a fictional contract.
In the case Gray v. Rankin, the court notes with regards to contracts implied-in-law:
“Contracts implied-in-law, on the other hand, are not really contracts at all but 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.”
What is the purpose of a quasi contract?
The purpose of a quasi contract is for the court to remedy a situation where a party has unfairly taken advantage of another.
In other words, it’s the court’s way to impose obligations on a party to render fair an otherwise unfair outcome.
For example, if a person comes into possession of another’s property, money or valuable goods, decides to keep it without paying for it or compensating the owner, the court may construct a quasi contract obligating the possessor of the property to pay the owner in compensation for such unjust outcome.
What is the difference between a contract and a quasi contract?
There are a few important differences between a contract and a quasi contract.
Absence of a contract
The first element distinguishing contracts and quasi-contract is with regards to the existence or not of an express contract between the parties.
For a contract to exist, the parties will either have to have an express contract or a contract implied in fact.
An express contract is pretty straightforward, the parties have signed a contract.
An implied-in-fact contract is a valid contract and as binding as an express contract with the difference that the formation of the contract is inferred by the actions of the parties.
You can read our interesting article on the famous Lucy v. Zehmer case dealing with the objective theory of contracts for more insights on this.
Another notable difference is that you do not need a mutual asset for the formation of a quasi contract.
In fact, the court can create a quasi contract without regard to the parties’ intention or willingness to enter into a contract.
On the other hand, a contract between two individuals can only be formed when there is a “meeting of the minds” or “mutual assent”.
This is the element of intention.
There is also a difference in the scope of the obligations resulting from a quasi contract and a contract.
The parties can agree to many obligations in a contract enforceable in court.
If the parties had mutually agreed to specific obligations, in most cases, the courts will give act to the intention of the parties unless there are legal remedies that can be invoked against the contract.
The general rule is for the court to enforce what the parties obligated to do in a contract.
On the other hand, a quasi contract is created only to the extent that it is needed to remedy an unfair situation.
The scope of the quasi contract is to reach a fair and equitable outcome.
A contract is legally formed by two individuals or entities looking to enter into a contract.
This means that two private individuals can form a legally binding contract provided the contract formation rules are observed and the contract does not violate public policy or the law.
On the other hand, private parties cannot enter into a quasi contract.
A quasi contract can only be formed in court by a judge.
Quasi contracts are formed under the law and based on how a judge believes an unfair situation should be remedied.
You can consider a quasi contract to be a judicial relief against unjust enrichment.
Quasi contract examples
A typical example of a quasi contract is when a person accepts goods and services and is expected to make a payment but does not pay for it.
Imagine that you are at a restaurant and you order a meal and pay for it.
However, another waiter by mistake serves your meal to another client who does not flag the mistake.
In this hypothetical example, since you had paid for the meal, you did not get your meal, the other person accepted your meal, ate it and did not pay for it, the court can impose a quasi contract on the other person obligating him or her to pay you even though you did not have a contract with the other customer in the restaurant.
Another example that we can consider is with regard to an agency contract.
Imagine that Person A owns a parcel of land.
Person B enters into a contract with a contractor to build a property on the parcel of land.
The contractor agrees to this contract having valid reasons to believe that Person B was acting as the agent for Person A who is the actual owner of the land.
If the work is completed and Person A does not pay claiming that he or she never asked for the work, the court may create a quasi-contract between the contractor and Person A for the payment of the work even though there was no contract between them.
What are the quasi contract elements?
Quasi contracts are enforceable contracts by their nature.
Since the parties did not have an express contract or even a contract implied in fact, the quasi contract is constructed by a judge to remedy an unfair situation without regard to the intent of the parties.
The enforceability of a quasi contract is directly linked to the obligations imposed by the court on the person.
For a court to remedy a situation by imposing a quasi contract, a person must demonstrate a few elements:
- A product or service was rendered to another party
- There was an expectation of payment
- The other party received the goods or services
- The other party did not pay for the goods or services
- This outcome is unfair and unjust
To put this in perspective, let’s look at an example.
Imagine a person orders takeout food from a restaurant and pays for the meal.
The restaurant delivers the food to the wrong person who takes delivery of the food without objecting.
In this case, the person who had ordered the food and did not receive the delivery can pursue the person who got the food and did not pay for it for unjust enrichment.
What is a quasi contract liability?
A quasi contract liability is an obligation a court will impose on a person to restitute another for being unjustly enriched.
Restitution in Latin is known as the quantum meriut.
The doctrine of quantum meriut is what makes quasi contracts possible also includes implied in fact contracts.
The extent of a person’s liability will depend on the extent of the enrichment of the other.
Seen the other way, the extent of the liability or rights of restitution is proportional to the impoverishment of a person at the expense of the enrichment of another.
The court’s objective is to create a legally enforceable obligation on one party in compensation of what another party may have lost at his or her expense.
As a result, the liability under a quasi contract will be either to the extent of a person’s enrichment or an amount the court may consider as a fair amount to equitably remedy an unfair outcome.
Frequently asked questions
Are quasi-contracts enforceable?
A quasi contract is a contract created by law or construed by a judge in court.
When created or construed by the court, there is no doubt that the quasi contract is enforceable by the parties.
However, a court cannot create a quasi contract when the parties had entered into an actual contract.
If a contract exists or the parties already have an agreement, quasi contracts cannot be enforced.
Also, a quasi contract will not provide as many recovery options as implied-in-fact contracts.
The quasi contract is created strictly to the extent it is necessary to prevent a situation of unjust enrichment whereas an implied-in-fact contract can result in various obligations a person may demand enforcement from the other.
How is a quasi contract formed?
A quasi contract is formed by a judge in a court of law.
Quasi contracts are legal remedies offered by the court to remedy what may be perceived as unfair or to create a balance between the parties.
Individuals cannot enter into a quasi contract as this type of contract is formed by the operation of the law.
What is an unjust enrichment?
Unjust enrichment is when a person unfairly benefits at the expense of another who is impoverished.
In common law, there are five elements that must be demonstrated for a court to conclude there was unjustified enrichment:
- Person A has received something of value or some services
- Person B was impoverished or is disadvantaged by what Person A received
- Person A’s enrichment must be unjust
- Person A’s enrichment is unjustifiable
- There are no other remedies available in law
Generally, the remedy for unjustified enrichment is restitution.
What is restitution?
Generally, quasi contracts are formed in court and the remedy for an unfair situation is restitution.
Restitution can either a compensation in cash to the extent necessary to balance the unfair outcome or the return of the goods or property that was taken away.
When a party receives restitution, the inequality is remedied, an unfair outcome is rendered fair.
What is an implied-in-law vs implied-in-fact contract?
An implied-in-fact contract is a contract that the court considers to be legally formed and enforceable by considering the facts of the case and the behaviour of the parties.
For example, you typically go to the restaurant, order food and start eating it before you even pay.
In this example, there is a contract implied in fact as your actions, behaviour and the circumstances make it very clear that you entered into a legally binding contract with the restaurant owner and you must pay for the price of the meal you ordered.
An implied-in-law contract is one that is an obligation imposed on a person by the operation of the law even though there was no contract between the parties or even an intention to form a contract.
For example, you order pizza and pay for it upon making the order.
If the pizza is delivered to your neighbour ends up with the pizza and eats it without paying, the court may consider that your neighbour unjustly benefited from this situation at your expense.
Even though you do not have a contract with your neighbour, the court can imply a contract in law between you and your neighbour requiring that he or she pay you the value of the pizza.