Legal Environment Of Business

Question-1: What do you mean by Quasi contract? Is it a contract at all? Answer: An agreement enforceable by low is a contract. There are several kinds of contracts, namely - valid contract, void able contract and void agreement, there is another kind of contract names quasi-contract. Quasi-contract: Quasi-contracts are contracts which are not created voluntarily, but in which the relations among the parties resemble the relations, which are created, virtually by contracts. The court treats Quasi-contracts as real contract and compels payment, which is promised under such contracts. In cases pf Quasi-contract the parties are put in the same position, as they would have occupied had there been a contract between them. Therefore, the contracts, which exist in law only but not in fact, are called Quasicontracts. In the Bangladesh contract act, the Quasi-contracts are described as the relations resembling those of contract. Section-68 to 72 of the contract act 1872 describe the cases which are treated as Quasicontracts,  “If a person incapable of entering in to 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 form the property of such incapable person.” -Section 68  “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.” -Section 69

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 “Where a person law fully dose anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit there of, the letter is bound to make compensation to the former in respect of or to restore, the thing so done or delivered. - Section 70  “A person who finds goods belonging to another and takes them into his custody, is subject to the same responsibility as a bailee” -Section 71 Section-168, 169 of the contract act deals with the rights and obligations of the bailee.  “A person to whom money has been paid or anything delivered by mistake or under coercion must repay or return it”. - Section 72 Example- ‘A” and ‘B’ jointly owe Tk. 2000 to ‘C’. ‘A’ alone pays the amount to ‘C’ and ‘B’ not knowing this fact, pays Tk. 2000 over again to ‘C’. ‘C’ is bound to repay the amount to ‘B’. After discussing the above sections of the contract act 1872 it can be easily said that Quasi-contract is a real contract by the court.

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Question-2: “There are certain relations resembling those created by contract.”-Discuss. Answer: There are many situations in which law as well as justice requires that a certain person be required to conform to an obligation, although he has neither broken an contract nor committed any tort. For example, a person in whose home certain goods have been left by mistake is bound to restore them. Such obligations are generally described, for want of a better or more appropriate name, quasi-contractual obligations. 'Theory of Unjust Enrichment The theory on which quasi-contractual obligations are based is not yet final settled. Lord MANSFIELD, who is considered to be the real founder of such obligations, explained them on the principle that law as well as justice should try to prevent "unjust enrichment", that is, enrichment of one person at the cost of another. His Lordship offered this explanation in Moses v Macferlan: "Jacob issued four promissory notes to Moses and the latter indorsed there to Macferlan, excluding, by a written agreement, his personal liability on the endorsement. Even so Macferlan sued Moses on the endorsement and he was held liable despite the agreement. Moses was thus compelled to discharge liability which he had excluded and, therefore, sued to recover back his money from Macferlan." He was allowed to do so. After stating that such money cannot be recovered where the person to whom it is given can "retain it with a safe conscience". Lord continued:

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MANSFIELD

"But it lies for money paid by mistake; or upon a consideration which happens to fail; or for money got through imposition; or extortion, oppression; or for an undue advantage taken of the plaintiff's situation, contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by ties of natural justice and equity to refund the money." A liability of this kind is hard to classify. Partly it resembles liability under the law of tort inasmuch as it arises independently of any contract. Partly it resemble contract inasmuch as it is owed only to one party and not "to persons generally' Thus it can be accounted for either under an implied contract or under natural justice and equity for the prevention of unjust enrichment. Lord MANSF1ELI preferred the latter theory. Theory of “Implied-in-fact” Contract: But beginning with the decision of the House of Lords in Sinclair v Brougham, it became fashionable to discard Lord

MANSFIELD'S

formulation and to rely upon an implied-in-fact

contract. A building society undertook banking business which was outside its objects and, therefore, ultra vires. The society came to be wound up. After paying off all the outside creditors, a mixed sum of money was left which represented partly the shareholders' money and partly that of the ultra vires depositors, but was not sufficient to pay both of them. The depositors tried lo get priority by resorting to the quasi-contractual action for recovery of money had and received for the depositors' benefit, for otherwise the shareholders would be unjustly enriched.

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The House of Lords allowed rateable (pari passu) distribution of the mixed fund among the claimants, but did not allow any remedy under quasi-contract. Lord

HALDANE

maintained that common law knows personal actions of only two classes, namely, those founded on contract and those founded on tort. "When it speaks of action arising quasi ex contractu it refers only to a class of action in theory which is imputed to the defendant by a fiction of law. Similarly, Lord SUMNER observed that an action for money had and received rests, not on a contractual bargain between the parties, but "upon a notional or imputed promise to repay". Lord

PARKER

expressly pointed out that if a promise to pay

back an ultra vires loan could be imputed to the company as quasi-contractual obligation, the result would be to validate a transaction which has been declared to be void on the ground of public policy and the law would be enforcing a notional contract where an express contract would have been void. This approach dominated decisions for a long time and the decision was taken to have settled that the juridical basis of quasi-contract was the implied, notional or fictional contract. Where the circumstances of a case do not lead to an inference of this kind or where such an inference would be against the law, no liability will arise. Restoration of Theory of Unjust Enrichment The identification of quasi-contracts with implied contracts restricted the scope of relief, which would have been possible without any such hindrance under the principle of "natural justice and equity". The suffocation was felt by House of Lords itself in Fibrosa Spolka Akeyjna v Fairbain Lawson Combe Barbour Ltd'' A sum of money was paid in advance under a contract for the supply of a machine or for the supply of machinery', and the performance was obstructed by the outbreak of war. Their Lordships allowed the advance to be recovered back as having been paid for a consideration, which had wholly failed. Lord WRIGHT lent support to Lord

MANSFIELD'S

observed: 6

theory of unjust enrichment. He

"It is clear that any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep. Such remedies in English law are generally different from remedies in contract or tort, and are now recognized to fall within a third category of the common law which has been called quasi-contract or restitution." Referring to the ratio decidendi of the decision of the House of Lords in Sinclair v Brougham9 Lord WRIGHT pointed out that the case turned upon the principle that it was against public policy to allow the recovery of an ultra vires deposit, whether the claim is based upon contract or quasi-contract. The observations of their Lordships relating to the foundation of quasi-contract were merely obiter dicta. Indeed the House adopted the pari passu distribution of the available assets as a technique to prevent the unjust enrichment of the shareholders at the cost of the depositors.10 After discussing the above theories we can come to the conclusion that there are certain relations resembling those created by contract.

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Question-3: Why is it said that infancy is a disability but in practice law protects infant persons, preserve their rights and estates and act as their guardian? Answer: Accounting to the section-10 of the contract act 1872 the parties to a contract must be competent and section-11 declares that a minor is not competent. But neither section makes it clear wheatear, if a minor enters into an agreement, it would be voidable at his option or altogether void. These provisions had, there fore, quite naturally given rise to a controversy about the nature of a minor’s agreement. The controversy was only resolved in 1903 by the judicial committee of the Privy Council. Under the Majority act, 1875 of Bangladesh a minor has been defined as “one who has not completed his or her 18th year of age” Infancy is said to be a disability but in practice it is really protection guaranteed by law courts. Law acts as the guardian of minors and protects their rights; because their mental faculties are not matured they don’t possess the capacity to judge what is good and what is bad for them. It has rightly their (infants) persons; preserves their right and estates; execute excuseth their laches, and assist them in their Pleadings. The judges are their counselors, the juries are their servants and law is their guardian, these things will be much more clear if we discuss the following facts. • Except in special cases, a contract by a minor is completely void and is not operative the reason being that minor cannot come to a right decision about advantage or disadvantage of the contract. •

Ratification: A mirrors agreement is void ab-initio and as such the agreement cannot be validated. Therefore, a minor cannot ralify a contract even an attaining majority.

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• If a minor receives a benefit form a sale or Mortgage of property, in that case the minor cannot be compelled for refunding the money and his property also cannot be held liable for that. • There can be no estoppels against a minor. It means that if a minor represents himself as a major by way of falsification and enters into an agreement with another one by inducing the latter, in that case the minor can nevertheless plead minority as a defense in an action on the agreement. • According to the section-30 of the partnership act a minor cannot enter into a contract of partnership. However with the consent of all the partners, the minor can enjoy all the benefits of a partnership. That means a minor can be a partner. • A minor can work as an agent of someone. But for that he will not be held liable to the employer or to the principal. He cannot also be held liable to a third person for this. • A minor cannot enter into an agreement but an agreement intered into by a guardian or by a supervisor of the minor’s property on behalf will be enforceable by law. The conditions which are to be fulfilled in this regard are the following, (1) The guardian or the supervisor did not exceed his rights or powers, and (2) That the agreement has been intend into by the guardian or supervisor for the benefit or interest of the minor or for the legal necessity of the minor. In this case, the powers or rights of the guardian will be determined by the guardian and wards act.

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• A minor can be promisee, according to the contract act; an agreement under which a minor has received a benefit can be enforced as against the other party. If a mortgage is executed in favor of a minor, in that case the minor can get a decree for the enforcement of the mortgage. • An agreement performed by a minor is considered void, and as such the court cannot direct specific performance of such agreement by the minor. • A minor can execute a negotiable instrument and also endorse it by making the other party liable but not himself. • The property of a minor is held liable for payment of reasonable price for the necessaries (these being goods, service, rendered, loans) supplied to the minor or to any one whom the minor is legally bound to support. • Minors cannot be declared as insolvent. Because they cannot operate any thing and law protects them to be declared insolvent. • In case of specific performance of contract direction or order cannot be given to a minor because law is protecting them to be directed. From the above analysis it can be easily said that infancy is a disability but in practice law protects infant persons, preserves their rights and estates and act as their guardian. That means a minor is not competent to contract but if he do so then law will protect them prom their problem.

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