Persons liable to compensate for receipt of non-gratuitous acts: High Court

Explaining the principle underlying one of the situations of quasi-contracts provided for in the Indian Contract Act, the Delhi High Court in a recent decision has explained Section 70 of the Act which relates to such situations in which performance may be enforced even though a formal contract may not have been concluded between the parties. Section 70 obliges a person to compensate another in the even the latter has provided a benefit to the former without having an intent to do to gratuitously. 

Referring to the various decisions of the Supreme Court on the issue and explaining the difference between English Law and Indian Contractual law on the issue, the High Court inter alia observed as under; 

46. Plaintiff has submitted that even in the absence of privity of contract, he is entitled to his dues i.e. the compensation as envisaged in Section 70 of the Contract Act, 1970. Section 70 of the Contract Act inter alia reads as follows: - “Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered”.

47. In State of West Bengal vs. M/s B.K. Mondal and Sons AIR 1962 SC 779 the pre-conditions for the application of the provisions of the Section 70 of the Contract Act have been discussed. The first condition is that a person should lawfully do something for another person or deliver something to him. The second condition is that in doing the said thing or delivering the said thing he must not intend to act gratuitously; and the third is that the other person for whom something is done or to whom something is delivered must enjoy the benefit thereof. When these conditions are satisfied Section 70 imposes upon the latter person, the liability to make compensation to the former in respect of or to restore, the thing so done or delivered. In the facts of the said case plaintiff/respondent had constructed a warehouse; the benefit of which was enjoyed by the defendant/appellant; defendant/appellant could have called upon the plaintiff/respondent to demolish the said warehouse and take away the materials used by it in constructing it; but if the defendant/appellant accepted the said ware house and used it and enjoyed its benefit then different considerations come into a play and Section 70 could be invoked.

48. Section 70 which occurs in Chapter V of the Contract Act deals with certain relations resembling those created by contract. In such cases which are filed under Section 70 a person doing something for another cannot sue for specific performance of the contract nor ask for damages for the breach of contract for the simple reason that there is no contract between him and the other persons for whom he does something or for whom he delivers something. Section 70 provides if the goods delivered are accepted or the work done is voluntarily enjoyed then the liability to pay compensation for the enjoyment of the said goods or the acceptance of the said work arises. Thus, where a claim for compensation is made by one person against another under Section 70, it is not on the basis of any subsisting contract between the parties but it is on the basis of the fact that something was done by the party for another and the said work so done has been voluntarily accepted by the other party.

49. These principles have been reiterated by the Supreme Court in the subsequent judgment i.e. New Marine Coal Company Pvt. Ltd. vs. The Union of India AIR 1964 SC 152. In this case it had been held that Section 70 of the Contract Act would be applicable even when a Contract Act had been held void; in view of the provisions of Section 173(5) of the Govt. of India Act 1935, the contract had been declared to be void; since A had performed his part of the contract and the Govt. of India had received the benefit of the performance of the said Act, provisions of Section 70 of the Contract Act were held applicable and the Govt. of India was made to pay compensation for the benefit received by it.

50. In V. R. Subramanyam vs. B. Thayappa & Ors AIR 1966 SC 1034, it has been held that if a party to the contract has rendered service to the other not intending to do so gratuitously and the other person has obtained some other benefit, the former is entitled to compensation for the value of the services rendered by him. 

51. In Aries Advertising Bureau vs. C.T. Devaraj AIR 1995 in SC 2251 this principle was reiterated. This was the case where the plaintiff had advertised certain products of the respondent; Section 70 was held inapplicable as no benefit has been derived by the respondent pursuant to the advertisement made by the appellant. 

52. In Food Corporation of India & Ors. vs. Vikas Majdoor Kamdar Sahkari Mandli Limited (2007) SCC 544 it was held that the provisions of Section 70 of the Contract Act are more liberal interpretation of the doctrine of quantum merit. This principle has no application where there is a specific agreement in operation. This section also prevents an unjust enrichment; being a principle of equity.

53. Applying this principle as enunciated hereinabove the plaintiff has been able to establish the three pre-conditions essential for the applicability of this provision of law. Plaintiff had lawfully advertised the products of M/s Dabur (India) Ltd. i.e defendant no. 1; plaintiff had not performed this job gratuitously; it was for consideration and which was his lawful expecatation; the said „other‟ person i.e defendant no. 1 had fully enjoyed the benefits of this act performed by the plaintiff; the advertisements had been beamed by the plaintiff on the various T.V. Channels which were the products of defendant no.1. This not being a gratuitous act of the plaintiff; he had his legal right to claim his compensation. 

54. This provision is attracted on all those cases where there is no privity of contract. Where it is established that the acts which are performed by A are for the benefit of B and even if there is no contract or express agreement between A and B the fact that B has benefited from this act of A, the act of A being a lawful act, not being gratuitous for the benefit of B, B is liable to make good the payment to A. B cannot also unjustly enrich himself. The principle enshrined in Section 70 of the Contract Act is squarely applicable to the facts of the instant case.

Have a look at the decision.