CruxBusiness Laws

The Act builds the idea of a contract in steps, all in s. 2:

1. A proposal (offer) is made when one person signifies to another that he is willing to do or not to do something, so as to obtain the other's assent (s. 2(a)).
2. When the person to whom it is made signifies assent, the proposal is accepted, and an accepted proposal is a promise (s. 2(b)).
3. A promise, or a set of promises in which each is the consideration for the other, is an agreement (s. 2(e)).
4. An agreement enforceable by law is a contract (s. 2(h)).

So a contract has two parts: an agreement, and enforceability by law. Every contract is an agreement, but an agreement becomes a contract only when the law will enforce it. Social and domestic arrangements (a dinner invitation, a parent's promise of pocket money) are agreements, but no one meant them to be enforced in court, so they are not contracts.

Promises that are the consideration, or part of the consideration, for each other are reciprocal promises (s. 2(f)): a promise to deliver a phone in return for a promise to pay for it.

Section 10 makes an agreement a contract when the parties are competent, their consent is free, the consideration and the object are both lawful, and the Act does not expressly declare that kind of agreement void. Courts add the requirements that sit behind the definitions. The full list:

• Offer and acceptance: a lawful offer by one party and a lawful acceptance by the other (this unit, sub-topics 4–7).
• Intention to create legal relations: both sides must mean the agreement to have legal consequences.
• Lawful consideration: something in return, not forbidden by law (BL02).
• Capacity: each party is of the age of majority, of sound mind and not disqualified by law (s. 11; BL03).
• Free consent: consent not caused by coercion, undue influence, fraud, misrepresentation or mistake (s. 14; BL04).
• Lawful object: the purpose of the agreement is lawful (s. 23; BL05).
• Not expressly declared void: the agreement is not one of those the Act itself makes void (ss. 24–30, 56; BL05).
• Certainty and possibility of performance: the terms are certain or can be made certain (s. 29), and the act is not impossible in itself (s. 56).
• Formalities: writing, registration or attestation, only where some law requires it (s. 10, second paragraph). An oral contract is otherwise good.

Contracts are classified in three ways.

By validity (enforceability)

By formation

• Express: terms stated in words, spoken or written (s. 9).
• Implied: terms inferred from conduct or circumstances, not words (s. 9). Boarding a metro and tapping a card is an implied contract to pay the fare.
• Quasi-contract: not a contract at all, but an obligation the law imposes as if there were one (ss. 68–72; BL06).
• E-contract: formed through electronic means such as an online order.

By performance

• Executed: both sides have done what they promised (a cash purchase at a shop).
• Executory: something remains to be done on one or both sides.
• Unilateral: one party has performed and only the other's obligation is outstanding (after a reward is earned, only payment is left).
• Bilateral: obligations are outstanding on both sides at the time of making.

An offer is a signal of willingness to do or not to do something, made to another person with a view to getting that person's assent (s. 2(a)). The words offer and proposal mean the same thing. The person making it is the offeror; the person to whom it is made is the offeree.

Offer and invitation to offer. An invitation to offer only asks others to make offers. A price list, a catalogue, goods displayed in a shop window with price tags, an advertisement for sale and a call for tenders are invitations. The customer who picks up the goods makes the offer, and the shopkeeper may accept or refuse it. A definite promise of a reward to anyone who does a stated act, by contrast, is itself a general offer.

1. It must intend legal relations. An invitation to a family lunch, even if accepted, gives no right to sue for travel costs if the host is away.
2. Its terms must be certain or capable of being made certain. "I will sell you some rice" is too vague; "100 kg of the basmati in my godown" is certain (s. 29).
3. It must be communicated to the offeree. An offer is complete only when it comes to the offeree's knowledge (s. 4). A person who does the required act without knowing of the offer has not accepted it.
4. It must aim at getting the other party's assent, not merely give information.
5. It may carry conditions, but it cannot say that silence or failure to reply will count as acceptance. The offeror cannot force a reply on the offeree.
6. It may be specific or general, and express or implied.
7. It must be an offer, not an invitation to offer, a statement of intention or a mere answer to a question (a quoted lowest price is information, not an offer).

When the offeree signifies assent to the offer, the offer is accepted and becomes a promise (s. 2(b)). Acceptance turns a revocable offer into a binding promise.

Rules of a valid acceptance:

1. By the offeree only. Only the person to whom a specific offer is addressed can accept it (Boulton v. Jones: goods ordered from a former shop owner and supplied by the new owner created no contract). A general offer can be accepted by anyone who knows of it.
2. Absolute and unqualified (s. 7(1)). An acceptance that varies any term is a counter offer.
3. Communicated to the offeror. A decision kept in the offeree's mind is no acceptance (Brogden v. Metropolitan Railway Co.: a draft agreement marked "approved" and left in a drawer made no contract).
4. In the prescribed or a usual and reasonable manner (s. 7(2)). If the offer prescribes a manner and the acceptance uses another, the offeror may, within a reasonable time after it reaches him, insist on the prescribed manner. If he does not, he is taken to have accepted the acceptance.
5. Within the time fixed, or a reasonable time, and while the offer is still open (before it lapses or is revoked).
6. Not by silence. Silence is not acceptance unless the offeree's own past conduct shows that silence means assent (Felthouse v. Bindley: an uncle who said he would treat the horse as his if he heard nothing more got no contract).
7. Express or by conduct. Performing the conditions of an offer, or taking the consideration offered with it, is acceptance (s. 8).
8. After knowledge of the offer. An act done in ignorance of the offer, or before it is made, is no acceptance.

Communication can be by any act or omission meant to communicate, or which has that effect (s. 3). Section 4 fixes when it is complete:

Revocation (s. 5). The offeror can withdraw his offer up to the moment the acceptance becomes complete against him, and no later. The acceptor can withdraw his acceptance up to the moment it becomes complete against himself, and no later.

How an offer comes to an end (s. 6 and general rules).

1. Notice of revocation by the offeror to the offeree.
2. Lapse of the time fixed for acceptance, or of a reasonable time where none is fixed.
3. Failure of the acceptor to fulfil a condition precedent to acceptance.
4. Death or insanity of the offeror, if the offeree learns of it before accepting.
5. Rejection by the offeree, or a counter offer.

• Anything done in ignorance of an offer is not acceptance: true. Knowledge of the offer is a condition of acceptance.
• Mere mental acceptance is no acceptance: true. Acceptance must be communicated in some outward form.
• Only one person can accept a general offer: false. Each person who performs its conditions accepts it, unless the offer itself limits the number.
• Silence is a mode of acceptance: false as a rule; true only where the offeree's past conduct makes silence mean assent.
• All contracts are agreements but not all agreements are contracts: true, because a contract is an agreement plus enforceability.

Section 2(d) defines consideration as an act, an abstinence or a promise, made at the promisor's desire by the promisee or by someone else, whether it was done in the past, is being done now, or is promised for the future. In plain terms it is something in return (quid pro quo): a benefit to the promisor or a detriment to the promisee.

The definition contains the rules that follow: it must be at the promisor's desire; it may come from the promisee or anyone else; and it may be past ("has done"), present ("does") or future ("promises to do").

1. At the desire of the promisor. An act done voluntarily, or at a third person's desire, is not consideration. Durga Prasad v. Baldeo: a man who built a market at the Collector's desire could not enforce the defendant's later promise of commission on goods sold there, because the market was not built at the defendant's desire.
2. From the promisee or any other person. In India consideration need not move from the promisee (see sub-topic 5).
3. Past, present or future. Past consideration is good, provided the act was done at the promisor's earlier request; the later promise shows the act was not meant to be free.
4. Need not be adequate (s. 25, Explanation 2; sub-topic 3).
5. Must be real, not illusory. A promise to do something physically impossible, or something the person giving the consideration is already bound by law to do, is no consideration.
6. Must be lawful (s. 23): not forbidden by law, fraudulent, immoral or opposed to public policy.

The law asks whether there is consideration, not whether it is a fair price. An agreement to which the promisor consented freely is not void merely because the consideration is inadequate. Inadequacy matters in one way only: the court may weigh it as evidence when deciding whether the promisor's consent was in fact free (s. 25, Explanation 2).

The rule: an agreement made without consideration is void (s. 25). It is saved, and becomes a contract, in three cases written into s. 25, and the section leaves two more situations untouched.

1. Natural love and affection (s. 25(1)). All four conditions must hold:
   • the agreement is made on account of natural love and affection;
   • between parties standing in a near relation to each other;
   • it is expressed in writing; and
   • it is registered under the law for the registration of documents.
2. Compensation for past voluntary service (s. 25(2)). A promise to pay, in full or in part, someone who has already of his own accord done something for the promisor, or done something the law could have compelled the promisor to do.
3. Promise to pay a time-barred debt (s. 25(3)). A promise in writing, signed by the person to be charged or his authorised agent, to pay wholly or in part a debt the creditor could have recovered but for the law of limitation.
4. Completed gift (Explanation 1). A gift actually made stands between donor and donee, though no consideration was given.
5. Other cases outside s. 25: an agency needs no consideration (s. 185); a bailment needs none (s. 148); a promise to subscribe to a charity is enforceable where the promisee has acted on it and taken on a liability.

Two different rules apply:

• Stranger to consideration. Because s. 2(d) allows consideration from "the promisee or any other person", a party to the contract may sue even if the consideration came from someone else. Chinnaya v. Ramayya: a woman gifted property to her daughter on the term that the daughter pay an annuity to the woman's brother; the daughter promised the brother in writing. The brother could enforce the promise though the consideration had moved from his sister.
• Stranger to contract (privity of contract). As a general rule only a party to a contract can sue on it; a person who is not a party cannot, even if the contract was made for his benefit.

Exceptions to privity, where a non-party may sue:

1. Trust: a beneficiary can enforce the trust against the trustee.
2. Family settlement: members for whom provision is made in a written family arrangement may enforce it.
3. Marriage arrangements: a person for whose benefit provision is made in a marriage arrangement may sue on it.
4. Assignment: an assignee of the benefit of a contract may enforce it, unless personal skill is involved.
5. Acknowledgement or estoppel: where the promisor, by conduct, acknowledges that he holds money for the third party.
6. Covenant running with land: a buyer of land with notice of a covenant attached to it is bound by it.
7. Agency: a principal can enforce a contract his agent made in the principal's name and within the agent's authority.

Every person is competent to contract who (s. 11):

1. has reached the age of majority under the law to which he is subject;
2. is of sound mind; and
3. is not disqualified from contracting by a law that applies to him.

Under the Indian Majority Act, 1875, a person domiciled in India attains majority on completing 18 years. A person even a day short of 18 is a minor.

An agreement with or by a minor is void from the beginning (void ab initio). In Mohori Bibi v. Dharmo Das Ghose (1903), a minor mortgaged his house to a moneylender to secure ₹20,000, of which ₹8,000 was actually advanced. The mortgage was held void and the minor did not have to repay the advance.

What follows from it:

1. No ratification. A minor cannot ratify the agreement on attaining majority, because a void agreement cannot be made good. A fresh promise given after majority for a loan taken as a minor is void for want of consideration, since the old advance is no consideration in law.
2. No estoppel. A minor can always plead minority, even after falsely claiming to be of full age.
3. No specific performance of a minor's agreement, since it is void.
4. Minor as beneficiary. A minor may accept a benefit: a promissory note or a mortgage in his favour can be enforced by him.
5. Minor as agent. A minor may act as an agent and bind his principal, but he is not liable to the principal for his own acts.
6. Minor in a partnership. A minor cannot be a partner, but can be admitted to the benefits of a partnership (s. 30, Indian Partnership Act, 1932).
7. Joint contract with an adult. The adult is bound; the minor is not.
8. Surety for a minor. An adult who stands surety for a minor's debt is liable to the creditor.
9. Guardian's contract. A contract made by a guardian on the minor's behalf, within his competence and for the minor's benefit, binds the minor. A contract by a court-appointed guardian, with the court's sanction, for the sale of the minor's property can be enforced by either side.
10. No insolvency. A minor cannot be declared insolvent.
11. Liability in tort. A minor is liable for a civil wrong, unless the wrong is really a breach of contract dressed up as a tort.

A minor who lies about his age is not estopped: he may still plead minority, and the lender cannot sue him for the loan or interest. Equity gives the other party a limited remedy only:

• If the minor obtained money or goods by falsely representing himself to be a major, the court may order him to give back what he still holds (the goods themselves, or money not yet spent).
• He is not liable to repay money he has already spent, even though he got it by fraud, because ordering payment would enforce the void agreement in another form.
• If the money was supplied for necessaries, the lender may recover from the minor's property under s. 68 (sub-topic 4).

Where a person who cannot contract, or anyone he is legally bound to support, is supplied with necessaries suited to his condition in life, the supplier is entitled to be reimbursed from that person's property (s. 68). For a minor this means:

1. Not personal. The minor is not personally liable; only his property is.
2. Only the value. The supplier gets a reasonable value of the necessaries, never the promised price where it is higher, and never more than the property can meet.
3. Two conditions. The goods or services must be reasonably necessary for his support in his station in life, and the minor must not already have a sufficient supply of them.
4. What counts. The test is the minor's position in life, and usefulness, not show, decides. Food, clothing suited to his position, education and funeral expenses are necessaries; luxuries, costly or unnecessary articles are not.
5. The liability is quasi-contractual, not contractual (BL06).

A person is of sound mind for contracting if, at the time he makes the contract, he can understand it and form a rational judgement about its effect on his interests (s. 12).

• A person usually of unsound mind but occasionally of sound mind may contract when he is of sound mind (a patient in a mental hospital during a lucid interval).
• A person usually of sound mind but occasionally of unsound mind may not contract while he is of unsound mind (a person delirious with fever, or so drunk that he cannot understand the terms).
• An agreement by a person of unsound mind is void, as with a minor. Necessaries supplied to him are recoverable from his property under s. 68.

Besides minors and persons of unsound mind, some persons are wholly or partly barred from contracting because of their political, legal or corporate status. Their incapacity comes from the law that governs their status, which is why s. 11 adds the third condition.

Persons consent when they agree on one and the same thing and understand it alike (s. 13); this meeting of minds is called consensus ad idem. Without consent there is no agreement at all.

Consent is free when it is not caused by coercion (s. 15), undue influence (s. 16), fraud (s. 17), misrepresentation (s. 18) or mistake (ss. 20–22) (s. 14). Consent is "caused" by one of these only when it would not have been given without it.

Coercion (s. 15) has three parts: (i) doing, or threatening to do, an act the Indian Penal Code forbids, or unlawfully holding back, or threatening to hold back, any property; (ii) to the prejudice of anyone at all; (iii) with the aim of making some person enter into an agreement.

Points to state:

• The threat may be against anyone, not only the other party, and may come from a stranger to the contract.
• It does not matter whether the Penal Code is in force where the coercion is used (Explanation to s. 15).
• The contract is voidable at the option of the party coerced (s. 19).
• A party who rescinds must restore any benefit he received under the contract (s. 64).
• Money paid or goods delivered under coercion must be repaid or returned (s. 72; BL06).

A contract is induced by undue influence where their relationship puts one party in a position to dominate the other's will, and he uses that position to gain an unfair advantage over the other (s. 16(1)). Both parts are needed: the position and its misuse.

When a person is deemed to dominate another's will (s. 16(2)):

1. he holds real or apparent authority over the other (an employer over an employee, a tax officer over an assessee), clause (a);
2. he stands in a fiduciary relation to the other (lawyer and client, doctor and patient, guardian and ward, spiritual guru and disciple), clause (a); or
3. he contracts with a person whose mental capacity is affected, temporarily or permanently, because of age, illness, or mental or bodily distress, clause (b).

Burden of proof (s. 16(3)). Where a person in a position to dominate the other's will contracts with him, and the transaction appears unconscionable on its face or on the evidence, the burden of proving that there was no undue influence lies on the dominant party. This does not affect s. 111 of the Indian Evidence Act, 1872.

Effect (s. 19A). The contract is voidable at the option of the influenced party. The court may set it aside absolutely, or, if that party has received a benefit, on such terms as the court thinks just.

A hard bargain in the ordinary course of business is not undue influence: a bank that lends at a high rate when money is scarce is not dominating the borrower's will.

Coercion and undue influence compared

Fraud (s. 17) is any of the acts below, done by a contracting party, by his agent, or by someone with his connivance, meaning either to deceive the other party (or that party's agent) or to lead him into the contract:

1. putting forward as a fact something false, which the maker himself does not believe;
2. actively concealing a fact by one who knows or believes it;
3. making a promise with no intention of keeping it;
4. any other act fitted to deceive;
5. any act or omission the law specially declares fraudulent.

Mere silence is not fraud (Explanation to s. 17). Keeping quiet about facts likely to affect the other's decision is not fraud, except:

• where the circumstances make it the silent person's duty to speak (for example, a relation of trust, as where a parent sells a horse to a child who has just come of age); or
• where the silence is itself equivalent to speech (the buyer says "if you do not deny it, I take it the machine is new", and the seller says nothing).

Essentials of fraud as a ground for avoiding the contract. There must be a false representation or concealment of fact, made knowingly or without belief in its truth, with intent to deceive; the other party must have relied on it and been deceived; and he must have suffered loss. A fraud that did not cause the other party's consent does not make the contract voidable (s. 19, Explanation).

Remedies (s. 19). The deceived party may avoid the contract, or insist on its performance and on being put in the position he would have been in if the representation had been true. He may also claim damages.

Misrepresentation means and includes (s. 18):

1. a positive assertion, not warranted by the maker's information, of something untrue, though he believes it true;
2. a breach of duty, with no aim to deceive, that misleads another to his loss and so benefits the person in breach or someone claiming through him; and
3. leading a party, even quite innocently, into a mistake about the substance of what the agreement is about.

Effect (s. 19). The contract is voidable at the option of the party misled, who may instead insist on performance on the footing that the representation was true. There is no claim for damages.

Exception to s. 19. If consent was caused by misrepresentation, or by silence that is fraudulent within s. 17, the contract is not voidable where the party had the means of discovering the truth with ordinary diligence. The exception does not protect active fraud.

Fraud and misrepresentation compared

Mistake of fact by both parties (s. 20). If both parties are mistaken about a fact that is essential to their agreement, it is void. Common cases:

• as to the existence of the subject-matter: the goods had perished before the agreement, unknown to both;
• as to identity of the subject-matter: each party means a different thing;
• as to title: the buyer already owns what he is buying;
• as to quantity, quality or price, where it is essential.

An erroneous opinion about the value of the thing is not a mistake of fact (Explanation to s. 20).

Mistake of fact by one party (s. 22). A contract is not voidable merely because one party was mistaken about a fact. The exceptions, where there is no real consent at all and so no contract:

• a mistake about the nature of the transaction (a person signs a guarantee believing it is a receipt); and
• a mistake about the identity of the person contracted with, where identity matters to the contract.

Mistake of law (s. 21). A mistake about a law in force in India does not make the contract voidable, since everyone is taken to know the law. A mistake about a foreign law is treated as a mistake of fact.

The object is the purpose of the agreement; the consideration is what each side gives for the other's promise. Both must be lawful. Under s. 23 they are unlawful in five cases:

1. Forbidden by law: an agreement to sell a banned drug, or to supply goods without a licence the law requires.
2. Of a nature that, if permitted, would defeat the provisions of any law: a defaulter whose land is auctioned for arrears, and who is barred by law from buying it, arranges for a friend to buy it and pass it back to him.
3. Fraudulent: three partners agree to share profits made by cheating customers.
4. Involving or implying injury to the person or property of another: an agreement to print copies of a book in breach of its copyright.
5. Regarded by the court as immoral or opposed to public policy: an agreement to let a house for an immoral purpose, knowing its use.

In each case the agreement is void. Where the consideration or object is unlawful in part, and the lawful part cannot be separated, the whole agreement is void (s. 24).

Public policy means the interest of the public. Courts do not invent new heads of public policy freely; the settled ones are:

An agreement not enforceable by law is void (s. 2(g)). It has no legal effect from the start. The Act declares these void:

Strictly, s. 11 only says who is competent to contract. That an incompetent party's agreement is void comes from Mohori Bibi v. Dharmo Das Ghose (BL03).

Restitution. When an agreement is discovered to be void, or a contract becomes void, a person who received an advantage under it must restore it or pay compensation for it (s. 65).

Restraint of marriage (s. 26). Every agreement restraining the marriage of any person other than a minor is void. A promise not to marry at all, or not to marry for a long period, cannot be enforced.

Restraint of trade (s. 27). Every agreement by which anyone is restrained from carrying on a lawful profession, trade or business of any kind is void to that extent. The Indian section makes no exception for a restraint that is partial or reasonable; only the exceptions below save it.

Exceptions.

1. Sale of goodwill (Exception 1 to s. 27). A seller of the goodwill of a business may agree with the buyer not to carry on a similar business:
   • within specified local limits;
   • so long as the buyer, or anyone deriving title to the goodwill from him, carries on a like business there;
   • provided the court finds the limits reasonable, having regard to the nature of the business.
2. Partners during the partnership: partners may agree not to carry on any competing business while the firm lasts (s. 11, Indian Partnership Act, 1932).
3. Outgoing partner: may agree with the continuing partners not to carry on a similar business within a specified period or local limits, if the restriction is reasonable (s. 36, Indian Partnership Act, 1932).
4. Service agreements: an employee's promise not to work for others or set up a rival business during the term of employment is valid. The saving covers the term of the employment only.
5. Trade arrangements: an agreement by a manufacturer to sell his whole output to one buyer for a period is not a restraint of trade.

Restraint of legal proceedings (s. 28). An agreement is void to the extent that it:

• absolutely stops a party from enforcing his contractual rights through the usual legal proceedings in the ordinary courts, or limits the time within which he may do so; or
• extinguishes a party's rights, or discharges him from liability, on the expiry of a specified period, so as to stop him enforcing his rights.

Exceptions:

1. an agreement to refer future disputes to arbitration, with only the award being recoverable;
2. a written agreement to refer to arbitration a dispute that has already arisen;
3. a written term in a guarantee by a bank or financial institution extinguishing rights or discharging liability on the expiry of a specified period of not less than one year from the happening or non-happening of a specified event.

Uncertainty (s. 29). An agreement whose meaning is not certain, or capable of being made certain, is void. "100 litres of oil" with nothing to show which oil is void; the same words from a dealer who sells only groundnut oil are certain. A price "to be fixed by a named valuer" is capable of being made certain and is valid.

Wager (s. 30). Agreements by way of wager are void. No suit lies to recover anything said to be won on a wager, or entrusted to anyone to abide the result of a game or uncertain event on which a wager is made.

Essentials of a wager:

1. a promise to pay money or money's worth;
2. conditional on an uncertain event happening or not happening;
3. two parties, each of whom stands to win or lose according to the event;
4. a common intention to bet when the agreement is made;
5. neither party has any interest in the event beyond the stake, and neither controls it.

Not wagers: commercial and share transactions where delivery is really intended; games of skill (crossword or picture competitions decided by skill, athletic contests); chit funds; and contracts of insurance, where the insured has an insurable interest and the contract indemnifies loss. A lottery, a game of chance, is a wager even when sanctioned by government.

Horse-race exception. Section 30 does not make unlawful a subscription or contribution of ₹500 or more towards a plate, prize or sum to be awarded to the winner of a horse race.

Contingent contract (s. 31). A contract to do or not to do something if an event collateral to the contract does or does not happen. Rules:

• one contingent on an event happening cannot be enforced until it happens, and becomes void if the event becomes impossible (s. 32);
• one contingent on an event not happening can be enforced when the event becomes impossible (s. 33);
• one contingent on an event within a fixed time becomes void if the event has not happened when the time expires, or becomes impossible before then (s. 35);
• one contingent on an event not happening within a fixed time can be enforced once the time expires without the event, or earlier if it becomes certain that the event will not happen (s. 35);
• one contingent on an impossible event is void, whether or not the parties knew of the impossibility (s. 36).

Reciprocal promises, legal and illegal (s. 57). Where parties promise, first, to do legal things and, secondly, in stated circumstances, to do illegal things, the first set is a contract and the second is void.

Alternative promise, one branch illegal (s. 58). Only the legal branch can be enforced.

In a quasi-contract there is no offer, no acceptance and often no consent, yet the law makes one person pay or return something to another as if he had promised to. The basis is unjust enrichment: no one should grow rich at another's loss without a just reason. Courts enforce these relations on grounds of equity, justice and good conscience.

Features:

1. the obligation is imposed by law, not created by agreement;
2. the right is usually a right to money, often a fixed sum;
3. the right is available only against a particular person, not against the world, which is why it resembles a contractual right.

1. Necessaries supplied to a person incapable of contracting (s. 68). A person who supplies a minor or a person of unsound mind, or anyone such a person is legally bound to support, with necessaries suited to his condition in life, is entitled to be reimbursed from the incapable person's property (BL03).
2. Payment by an interested person (s. 69). A person interested in the payment of money that another is bound by law to pay, who pays it, is entitled to be reimbursed by that other.
3. Benefit of a non-gratuitous act (s. 70). Where a person lawfully does something for another, or delivers something to him, not intending to do it free, and the other enjoys the benefit, the other must pay compensation or restore the thing. All three conditions are needed: the act is lawful, it is not meant to be gratuitous, and the other enjoys the benefit.
4. Finder of goods (s. 71). Whoever finds another's goods and takes charge of them carries a bailee's responsibility: he must take reasonable care of them, may not use them as his own, and must return them when the owner is found (BL10).
5. Money paid or goods delivered by mistake or under coercion (s. 72). The person who received them must repay or return them.

Where one party has done work under an agreement that turns out to be void, or under a contract the other party wrongfully ends, he may claim payment for what he has done, as much as is earned (quantum meruit). It rests on the same idea as the quasi-contracts: the other party should not keep the benefit free. The rules belong with remedies for breach (U2, BL08).