Legal Blog: Obligation of Person Enjoying Benefit of Non-Gratuitous Act : The Law

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Thursday, February 24, 2011

Obligation of Person Enjoying Benefit of Non-Gratuitous Act : The Law

Justice Jain
Justice V.K. Jain of the Delhi High Court has examined the law relating to the Obligation of a person enjoying benefit of non-gratuitous act as contemplated under S. 70 of the Indian Contract Act, in M/S. S.N.Nandy & Co. vs M/S. Nicco Corporation Ltd. While enunciating the law on the subject, the Court held as under;

17. Assuming, however, that the extra works claimed by the plaintiff were not authorized by the defendant and, therefore, the defendant is under no contractual obligation to pay for those works, the plaintiff is entitled to get reasonable payment for these works in view of the provisions contained in Section 70 of the Contract Act, 1872, which reads as under:-

"70. Obligation of person enjoying benefit of non-gratuitous act. 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."

18. A bare perusal of the above referred Section would show that three conditions need to be fulfilled before benefit of this provision can be invoked by a person. The first condition is that the claimant should either lawfully do something for another person or deliver something to him. The second condition is that while doing or delivering something, the claimant must not be acting gratuitously and thirdly, the person for whom something is done or to whom something is delivered must enjoy the thing done for or delivered to him as the case may be.

Invocation of Section 70 of the Contract Act was disputed by learned counsel for the defendant on the ground that the plaintiff has not pleaded essential requirement of the Section. In support of his contention that pleading ingredients of Section 70 is a pre-condition for its invocation, the learned counsel for the defendant has referred to Kotah Match Factory Kotah v. State of Rajasthan, AIR 1970 Rajasthan 118, Hansraj Gupta & Co. v. Union of India, AIR 1973 SC 2724, Union of India v. Sita Ram Jaiswal, AIR 1977 SC 329 and Devi Sahai Palliwal v. Union of India and another, AIR 1977 SC 2082.

19. In Kotah Match Factory (supra), the Rajasthan High Court noted that the plaintiff did not raise the plea for compensation under Section 70 of the Contract Act nor was any issue framed, nor were the parties given an opportunity to lead any evidence on the point. It was found that the case of the appellant before the Court was based upon an agreement. It was held that since the parties had not gone on trial on the question of compensation under Section 70 of the Contract Act, if the benefit of the aforesaid provision is allowed at this stage, it would amount to taking the opposite party by surprise. In Hansraj Gupta & Co.(supra), the Supreme Court was of the view that the conditions for the applicability of the Section 70 must at least be set out in the pleadings and proved. In Sita Ram Jaiswal (supra), the Supreme Court, inter alia, observed as under:-

"6. The three ingredients to support the cause of action under Section 70 of the Indian Contract Act are these: First, the goods to be delivered lawfully or anything has to be done for another person lawfully. Second, the thing done or the goods delivered is so done or delivered "not intending to do so gratuitously." Third, the person to whom the goods are delivered "enjoys the benefit thereof." It is only when the three ingredients are pleaded in the plaint that a cause of action is constituted under Section 70 of the Indian Contract Act. If any plaintiff pleads the three ingredients and proves the three features the defendant is then bound to make compensation in respect of or to restore the things so done or delivered."

In Devi Sahai Palliwal (supra), the Supreme Court found that there was no allegation in the plaint to support any pleading in proceeding under Section 70 of the Indian Contract Act. Relying upon its earlier decision in Sitaram Jaiswal (supra), it was held that in the absence of proper pleadings under Section 70 of the Indian Contract Act, the plaint should not be entertained.

20. The learned counsel for the plaintiff on the other hand has referred to State of West Bengal v. M/s B.K. Mondal and Sons, AIR 1962 SC 779, V.R. Subramanyam v. B. Thayappa and others, 3 SCR 663 and Food Corporation of India & Others v. Vikas Majdoor Kamdas Sahkari Mandli Ltd., 2007 (13) Scale 126. In the case of B.K. Mondal and Sons (supra), the Supreme Court, after reiterating the three conditions, which need to be satisfied before invoking Section 70 of the Contract Act, was of the view that when these conditions are satisfied, Section 70 imposes upon the person for whom something is done or to whom something is delivered, the liability to make compensation in respect of or restore the thing done for or delivered to him. During the course of the judgment, the Court, inter alia, observed as under:-

"14 .If a person delivers something to another it would be open to the latter person to refuse to accept the thing or to return it; in that case S. 70 would not come into operation. Similarly, if a person does something for another it would be open to the latter person not to accept what has been done by the former; in that case again S. 70 would not apply. In other words, the person said to be made liable under S. 70 always has the option not to accept the thing or to return it. It is only where he voluntarily accepts the thing or enjoys the work done that the liability under S. 70 arises. Taking the facts in the case before us, after the respondent constructed the warehouse, for instance, it was open to the appellant to refuse to accept the said warehouse and to have the benefit of it. It could have called upon the respondent to demolish the said warehouse and take away the materials used by it in constructing it; but, if the appellant accepted the said warehouse and used it and enjoyed its benefit then different considerations come into play and S. 70 can be invoked. Section 70 occurs in Chapter V which deals with certain relations resembling those created by contract. In other words, this chapter does not deal with the rights or liabilities accruing from the contract. It deals with the rights and liabilities accruing from relations which resemble those created by contract .Therefore, in cases falling under S. 70 the person doing something for another or delivering something to another cannot sue for the specific performance of the contract nor ask for damages for the breach of the contract for the simple reason that there is no contract between him and the other person for whom he does something or to whom be delivers something. All that Section 70 provides is that 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 S. 70, it is not on the basis of any subsisting contract between the parties, 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. That broadly stated is the effect of the conditions prescribed by S. 70."

21. In V.R. Subramanyam (supra), the Court reiteratd the settled proposition of law that if a party of a contract rendered service to other not intending to do so gratuitously and another person had obtained some benefit, the former is entitled to compensation for the value of the services rendered by him. It was further held that even if a person has failed to prove an express agreement in this regard , the Court may still award him compensation under Section 70 of the Contract Act and such a decree for compensation would be under the statute and not under a contract.

22. In Food Corporation of India (supra), the Supreme Court, inter alia, observed as under:-

"12 ..A person who does work or who supplies goods under a contract, if no price is fixed, is entitled to be paid a reasonable sum for his labour and the goods supplied. If the work is outside the contract, the terms of the contract can have no application; and the contractor is entitled to be paid a reasonable price for such work as was done by him.

13. If a party to a contract has done additional construction for another not intending to do it gratuitously and such other has obtained benefit, the former is entitled to compensation for the additional work not covered by the contract. If an oral agreement is pleaded, which is not proved, he will be entitled to compensation under Section 70. Payment under this section can also be claimed for work done beyond the terms of the contract, when the benefit of the work has been availed of by the defendant."

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