Report No. 3
We recommend that a new definition of the word "application" so as to include any petition, original or otherwise, should be added. The object is to provide a period of limitation for original petitions and applications under special laws as there is no such provision now. Consequential alterations in the definition of the word 'applicant' should also be made.
There are numerous Articles in the present Act relating not only to contract, as the word is commonly understood, but also to transactions coming under the head of 'implied contracts' and 'quasi-contracts.' One obvious way of simplifying the Act would be to have a comprehensive definition of the word 'contract' for the, urposes of this Act and to make a single provision for all suits based on contract. The question is how to frame a suitable definition of the word 'contract'. For this purpose, it is necessary to digress a little into the field of the law of contract, to help us to realise the correct implication of the words 'contract', 'implied contract' and 'quasi-contract' (all of which we propose to bring under one definition for the purposes of the Limitation Act). It is also necessary to trace the development of this branch of law in England, as ideas based on English Common law were imported into many of our early statutes.
11. In England, the development of the law of contracts was peculiar due to historical reasons. The common law courts paid more regard to the form of action than to its nature. The action of indebitatus assumpsit was the foundation of the development of this branch of the law. Apart from obligations ex delictu and ex contractu, certain relationships between parties giving rise to obligations (such as actions for money had and received) came to be treated as if they had a contractual origin. With the dichotomy of actions into contracts and torts in the 19th century, obligations of this kind were treated as quasi-contracts. Some textbook writers have classified quasi-contracts under various heads. Chitty includes the following under this head:-
(1) action on judgments, English and foreign,
(2) action for money paid by the plaintiff at the request of the defendant,
(3) action for payment by sureties,
(4) action for contribution between joint-contractors,
(5) action for money had and received (which is treated as based on implied contract) including money in the hands of a stakeholder,
(6) action for recovery of consideration when it has failed,
(7) action for money paid by mistake,
(8) action for money obtained by fraud or extortion,
(9) action for money paid under an illegal contract,
(10) action for money paid under a void judgment. Prof. Winfield defines a quasi-contract as follows:-
"The liability not exclusively referable to any other head of the law imposed upon a particular person to pay money to another particular person on the ground that non-payment of it would confer on the former an unjust benefit."
He classifies quasi-contracts, under four heads:
(1) pseudo quasi-contracts,
(2) pure quasi-contracts,
(3) quasi-contracts alternative to some other form of liability, and,
(4) doubtful quasi-contracts.
On the other hand, Cheshire adopts only a two-fold classification:
(1) genuine quasi-contracts, and
(2) doubtful quasi-contracts.
Under the former are included actions for money paid by the plaintiff to the defendants, actions for money paid under a mistake of fact, actions for money paid in pursuance of an ineffective contract and claims on quantum meruit Under the latter, actions on judgment-debts, on money due under statute by law or custom, and claims for necessaries supplied to persons under incapacity are included. From this classification it would be seen that various kinds of actions are included -under quasi-contracts. The law was developed from the observations of Lord Mansfield in Moses v. Macferlan, (1760) 2 Burrow 1005 In the decision in Sinclair v. Brougham, 1914 AC 398 Lord Summer observed that the action for money had and received was founded on an implied contract (its origin was in the writ of assumpsit and that it should therefore, be classified as a contractual action.
This view evoked severe criticism in academic and judicial circles. In the recent pronouncement in re Diplock, 1948 Ch D 465 the view of Wynn-Parry J., in the court of first instance, that the action for money had and received is a common law action on the case founded on an implied promise to pay, was accepted 'by the Court of Appeal though it reversed the judgment on other grounds. In the House of Lords, the decision of the case turned on another point Minister of Health v. Simson, 1951 AC 251 In the Fibrosa case, 1943 AC 32 (61) Lord Wright thought that the legal basis for an action under quasi-contract was restitution. He said:
"It is clear that any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit i.e. to prevent a man from retaining money or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or in tort and are now recognised to fall within the third category of common law, which has been called quasi-contract or restitution."
He dismissed the observations of Lord Sumner in Sinclair's case as obiter dicta. In United Australia v. Barclays Bank, 1941 AC 1 (29) Lord Atkin pointed out that the action was based upon fictitious contract and characterised the fiction as obviously fanciful in these words:
"These fantastic resemblances of contracts invented in order to meet requirements of the law as to forms of action which have now disappeared should not in these days be allowed to affect actual rights. When these ghosts of the past stand in the path of justice clanking their medieval chains, the proper course for the judge is to pass through them undeterred."
Notwithstanding these strong observations by two eminent judges, it cannot be said that the English courts have accepted the principle of unjust benefit as the basis of English quasi-contract. Lord Porter stated1 that though the law of unjust enrichment occupies a permanent place in the law of Scotland and in the United States, it formed no part of the law of England and that the doctrine of restitution so described would be too widely stated. Under English law it has not yet been accepted that the true basis for quasi-contracts and actions for money had and received is the doctrine of restitution on the basis of unjust enrichment. Denning L.J., in a recent book "The Changing Law" (pp. 62-63) has stated that the decision of Lord Porter does not rule out the law of restitution though it excludes the law of unjust enrichment.
According to his view the law of restitution covers those cases "which cannot be brought within the scope of contract or tort but in which nevertheless the plaintiff can recover money under the money counts or under some positive rule of law such as that applied in the Cairo case or even under the rules of equity as in the case of Customers of Birkbeck Bank" (pp. 66-67). He advocates the recognition of a third category of the common law distinct from contract and tort to be called "restitution". The underlying principle of the law of restitution is that no one should unjustly enrich himself at the expense of his neighbour. It may be said, as was felt by Denning, L.J., that the conception is too indefinite to be stated as a principle of law. Yet he observes, at p. 65:
"It sufficiently indicates a new category. Just as the conception of contract is enforcement of promises, and the conception of tort is damages for prevention of unjust enrichment. Once this category comes to be accepted into the law, the all remedies into the straight jacket of contract and tort but will be able to develop a comprehensive category with its own distinct principles" (p. 65).
1. 1951 AC 512.
12. In India, the law of contract is to a large extent governed by statute. Where there is provision in the Contract Act, the Court will not apply common law, as for example the doctrine of frustration, in view of section 56; vide Satyabrato Ghosh v. Mangneeram, 1954 SCR 310 The Act, however, is not exhaustive and does not purport to embody all the principles of the law relating to contract including relations resembling those created by contract. It is no doubt true that in Chapter V sections 68 to 72, the principles of the common law which are described as quasi-contracts or implied contracts are enacted.
But even there the Act does not cover all the principles which form part of the substantive law of contracts. Thus, the legal basis of an action for money had and received for which a period of limitation is prescribed by Article 62 of the Limitation Act is nowhere to be found in the statute book. Courts in India have, however, applied the principles of that action to situations arising in India. It will be necessary when dealing with the law of Contracts to bring into the ambit of the Act of all such principles of English law as have been extended to India on the principle of justice, equity and good conscience, but have not been embodied in the Act. In order to simplify the law and to avoid labels adopted in England which have given rise to conflicting decisions, we may embody in the Contract Act the principles which should apply to India having regard to the doctrine of restitution adumbrated by Denning L.J.
The law must progress and should not remain stagnant. The doctrine of unjust enrichment has been applied in other countries and justice requires that a man should not unjustly benefit himself at the expense of another. To what extent the doctrine of unjust enrichment should be adopted in the Contract Act will have to be considered. The principle underlying section 68 to 72 of the Contract Act would be the same whether the claim be described as being for reimbursement or for restoration or for contribution or for restitution.
13. The expression "implied contract" is used in two different senses. Section 9 of the Contract Act draws a distinction between express and implied promises. If the proposal or acceptance of promise is made in words, the contract is express. If such a proposal or acceptance is made otherwise than in words, it is an implied contract. This is the strict and orthodox meaning of "implied contract". But the expression is also used in a wider sense to include legal relations in which the essential element of a contract is lacking. As observed by Lindley L.J., in re Rhodes, (1890) 44 Ch D 94 (107). the expression "implied contract" has been used to denote not only a genuine contract established by inference but also an obligation which does not arise from any real contract but which can be enforced as if it has a contractual origin. Some obligations which are labelled as quasi-contracts under English law will come under the second category of implied contracts in the wider sense. They are not strictly contracts as the obligations do not arise from the consensus of the parties.
14. So far as the Limitation Act is concerned, we may adopt an extended definition of the word "contract", to include in its ambit all implied contracts and quasi-contracts, i.e., not only implied contracts which are consensual and would be contracts under the Contract Act but also all such obligations which the law imposes or imputes having regard to the relationship between the parties and the circumstances of the case in order to prevent one party from retaining an unjust benefit and to force him to return such benefit by way of restitution. This would help in the consolidation of numerous Articles and thereby in the simplification of the Limitation Act.
15. "Plaintiff" & "Defendant". -
The definitions of "plaintiff" and "defendant" as they stand in the Act include a person from or through whom a plaintiff or defendant derives his right or liability to sue or to be sued. The object of this inclusive definition is to make it clear that the cause of action for a person in whom the right to sue is vested and the person on whom the right has subsequently devolved is one and the same. The position holds.good in the case of executors, administrators and representatives also and we think it necessary that the definitions should be enlarged so as to include not only a person from whom the plaintiff derives his title but also a person whose estate is represented by an executor, administrator or other representative.
16. The applicability of Article 144 of the Limitation Act may be taken to illustrate the need for this. The third column of that Article states that the time begins to run "when the possession of the defendant becomes adverse to the plaintiff". If the "plaintiff" therein referred to is the person to whom the right to sue had accrued and who in fact files a suit for recovery of possession, there will not be, any difficulty. But if the plaintiff who institutes the suit is the person on whom the right to sue devolved, the adverse possession of the defendant against the predecessor of the actual plaintiff would be of no avail and time would run only from the moment when the actual plaintiff derived his title. The object of the definition of "plaintiff" in the Limitation Act, as it is now is to resolve this difficulty by making it clear that the cause of action for both is the same and the date of its accrual is the date when the defendant's possession became adverse against the original owner. A similar situation may also arise in the case of executors, administrators or other representatives. Perhaps this was not noticed at the time when the present Act was passed.
17. Under section 306 of the Succession Act many causes of action survive to the executors etc., and in respect of all those causes of action the executors etc., are in the same position as derivative title holders though they are not treated as such.
18. The Courts have gone to the length of holding that if a father to whom the right to sue had accrued gave notice under section 80 C.P.C. and died before filing the suit and the suit was actually instituted by the son, there should be a further notice by the son as the section contemplated notice by the actual plaintiff and not the person who had the right of suit. (See Mahadeva Dattatreya Rajarishi v. Secretary of State), AIR 1930 Bom 367(1) In the absence of a clear definition a similar interpretation might be placed on the word "plaintiff" in the Limitation Act when any executor, etc., happens to institute proceedings. To cover this lacuna we propose an extended definition. The same reasoning would apply to the definitions of "defendant" and "applicant" and they too should be amplified as stated in paragraph 15.
19. The executor, administrator or other representative has an independent right of suit and is under an independent liability in cases arising under the Legal Representatives Suits Act, 1855 and the Fatal Accidents Act. These stand on a different footing.
There should be a definition of the word 'tort' so as to include within it not only torts strictly so called, but also any breach of statutory duties of care which result in injury and damage to the person or property. The Limitation Act itself draws a distinction between breaches of contract and wrongs independent of contract, vide section 23. A definition of 'tort' so as to include all civil wrongs independent of contract may be adopted.
21. "Promissory Note", "Bill of. Exchange", "Bond" and "Easement".-
The definitions of "promissory note", 'Till of Exchange" and "Bond" need not be retained as we propose to consolidate all Articles relating to Contract in one Article, as a result of which these words will not find a place in the revised Act. The definition of the word "Easement" may also be dropped if sections 26 and 27 are deleted as proposed by us.
22. "Period prescribed".-
The expression "period prescribed" occurring in section 4 has been construed differently by different courts. Some courts take the view that it means only the periods of limitation prescribed in the Schedule to the Act and does not attract the extensions of the periods of limitation under the sections, which is obviously not correct. As the expression occurs in other sections also, it would be better if a new definition clause for "period prescribed" is inserted to the effect that it means the period of limitation computed in accordance with the provisions of the Act. We recommend accordingly.