Quasi Contracts: Everything You Need to Know
Quasi contracts are contracts that the court creates as a way to bind two parties to an official agreement.3 min read
Quasi contracts are contracts that the court creates as a way to bind two parties to an official agreement. They are usually formed when the parties do not have any previous agreement with one another. The purpose of creating a quasi contract is to ensure that one party does not unfairly benefit from the other. Certain requirements must be met before the court imposes such a contract.
What Is a Quasi Contract?
A quasi contract refers to an agreement that the court system uses to impose obligations on two parties who have yet to enter into a legally-binding agreement. It is formed by a court order, not an agreement between the parties involved. For instance, the court can resolve disputes over payments for products or services by creating a quasi contract if the parties do not have an official agreement.
Sometimes, a party who has incurred a loss in a business deal may not be able to gain adequate compensation without proof of an existing contract or other legally-binding agreement. To prevent an unfair outcome, the court will create a fictitious agreement if the parties do not have a legally-recognized agreement. By creating a quasi contract, a judge can remedy a situation where one party gains something at the other party's expense. The goal of such a contract is to prevent any party from being unjustly enriched.
The court invokes a quasi contract when unjust enrichment exists without judicial relief. Unjust enrichment refers to a situation where someone has retained money or other benefits that rightfully belong to another person. With a quasi contract, the innocent party may gain as much compensation as necessary to prevent the other party from being unjustly enriched. Since this kind of contract is not an actual contract, it does not require mutual agreement. Also, the court can impose an obligation without considering the intent of either party.
When one party files a lawsuit under a quasi contract, recovery or restitution under quantum meruit is usually the preferred remedy. The way liability is determined varies from one case to another. The quantum meruit doctrine enables the court to imply a contract if none exists. It includes quasi contracts and implied-in-fact contracts. The term “quantum meruit” is also used to explain the process of determining the amount of recovery the plaintiff is entitled to in an implied contract.
Requirements for a Quasi Contract
The court will only use a quasi contract if a case meets these two requirements:
- The defendant must have received a tangible product or service from the plaintiff, with the impression that he or she will make payment for that product or service.
- The plaintiff is required to explain why it is unfair for the defendant to receive the product or service without making payment for it, resulting in unjust enrichment.
What Constitutes Unjust Enrichment?
Unjust enrichment happens when an individual gains a benefit in an unjust manner, whether it is by chance or due to another person's misfortune. One is considered unjustly enriched when he or she has received a benefit without working or paying for it. As such, it is ethically and morally appropriate for him or her to return it. To prove unjust enrichment, one must show the following five elements:
- The alleged offender must have gained enrichment.
- The plaintiff must be disadvantaged because of the enrichment.
- It must be established that the enrichment is unjust.
- Explanation of the enrichment and the resultant disadvantage must be unavailable.
- There must be an unavailability of remedy granted to the plaintiff by law.
Restitution is the remedy available to a plaintiff in a case that involves unjust enrichment. This type of payment compensates the plaintiff for what he or she was initially promised as a way to correct an act of injustice.
Recovery in a Quasi Contract
Generally, recovery in a quasi contract can happen in one of the three following situations:
- A contract does not exist but the law requires that the innocent party be compensated.
- There is an unenforceable contract.
- The plaintiff has broken a valid, existing contract materially and given a benefit to the other party.
Depending on equity and fairness, the court usually awards either reliance damages or restitution.
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