What Is Quasi Contract: Everything You Need to Know
A quasi contract, also known as a constructive or implied-in-law contract, is needed when one party profits at the expense of another party but no formal agreement between the parties existed. 3 min read
2. An Example Quasi Contract Situation
3. What Do Quasi Contracts Do?
4. Who Determines a Quasi Contract?
5. How Does a Quasi Contract Differ From Other Contracts?
What is "quasi contract?" A quasi contract, also known as a constructive or implied-in-law contract, is needed when one party profits at the expense of another party but no formal agreement between the parties existed. In these cases, the court creates a contract so that one party does not become unjustly enriched.
Unjust enrichment occurs when one party profits unreasonably or at the expense of another party. Since one party has not paid for or exchanged some benefit in return for that received, the party should give back the goods or pay for the services rendered. A quasi contract allows the judge to enforce this idea.
A Brief History of the Quasi Contract
In the Middle Ages, there was a practice called "indebitatus assumpsit" in which a judge enforced a payment between two parties as if they had agreed to a contract. The court could compel the defendant to pay the plaintiff, the party suing for payment for services or a return of goods, an amount that the court determined. The court could act as if the defendant and plaintiff had come to an agreement because the behavior of the defendant implied that the defendant agreed to a contract to pay the plaintiff even though no such contract had been made.
An Example Quasi Contract Situation
A homeowner, Janice, has no idea that her brother, Larry, has agreed to let Tom, a homebuilder, construct a house on her property. Larry cannot pay Tom, so he sends the bill to Janice, who refuses to pay. Although Janice and Tom have no formal agreement, the court could argue that Janice must pay Tom for his time and materials to avoid becoming unjustly enriched. The amount that Tom receives from Janice would be limited to payment for goods and services rather than profits from selling the home since Janice did not enter into a formal contract with him.
What Do Quasi Contracts Do?
A quasi contract is a legal remedy, meaning the court enforces a penalty to address a wrong. Its purpose is to help the plaintiff regain any losses at the hands of the defendant in cases of unjust enrichment. The legal remedy for quasi contracts is called restitution. Restitution comes in two forms:
- Payment for services rendered.
- A return of items unpaid for.
How much restitution a plaintiff receives depends on the idea of "quantum meruit," meaning “as much as is deserved.” Since the plaintiff and defendant did not have a formal agreement, the plaintiff cannot sue for profits.
Who Determines a Quasi Contract?
A judge makes an enforceable contract after the fact to address an unfair situation when there is an issue about payment for goods or services. This quasi contract between parties is necessary because the plaintiff often needs evidence of some kind of legal contract or agreement to regain any actual or possible losses under the idea of unjust enrichment. The judge will take into consideration the conduct of both parties, their relationship, and the potential for one to become unjustly enriched at the expense of the other when determining a quasi contract.
How Does a Quasi Contract Differ From Other Contracts?
Mutual assent, or agreement between two parties intending to form a contract, is not a concern for the court in quasi contract cases since the court identifies an obligation between the defendant and plaintiff without both parties agreeing to a contract. This lack of mutual agreement differs from other contracts, which require two or more parties to agree that they will mutually benefit by exchanging or providing goods and services. The idea is that the defendant needs to agree to a contract for fairness, specifically to avoid unjust enrichment.
There is a subtle difference between quasi contracts and implied-in-fact contracts. An implied-in-fact contract is an agreement that the judge considers to be legally-binding based on the actions of the parties involved. In an implied-in-fact contract, there is evidence of a consensual transaction, which does not exist when a judge makes a quasi contract determination. Although both are unwritten, implied contracts made after the fact, judges create quasi contracts, while two parties create implied-in-fact contracts through their behavior.
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