There is a general principal that “No one should get benefited by harming others or by damaging others”. This same principal is elucidated under Contract Act,1872. Doctrine of Restitution safeguards the plaintiff and give him a right to reclaim what he has given to defendant during the validity of Contract as part of consideration to the defendant. This doctrine is based on the theory of unjust enrichment. Earlier the jurist and lawyers do not know about the concept of unjust enrichment, but it was noticed that number of remedies were given in the cases which later named as unjust enrichment. This article will cover the Doctrine of Restitution under Contract Act along with some landmark judgments.
Restitution is a concept in the Indian Criminal Justice System. It has an established position in law and justice. The historical development of the restitution can be traced back from the middle ages and Germanic Common Laws. Any civilized system provides remedies for unjust enrichment or unjust benefit, in such case restitution becomes the remedy which means restore the things to the proper owner. When a agreement become void at the later stage due to some uncertain event, and any person who has received a benefit or advantage under that agreement from another person has to reimburse the benefit to the person from whom he received it. This principal is governed by the doctrine of restitution, which is defined under section 65 of Indian Contract Act. This doctrine is based on the theory of the unjust enrichment.
MEANING OF RESTITUTION
The word Restitution has been derived from a Latin word “restituere” which means to restore or to rebuild. Restitution means to restore the benefit and to put the plaintiff in the original position that he stands before the contract and confines the defendant from making wrongful gain. The principle is that no one can be enriched at the expense of another’s by causing loss or harm to the another, if he does so, he have to reimburse the value of that service, it is called the theory of unjust enrichment. If there is no consideration paid to the plaintiff by the defendant, he has to restore the benefit the victim.
DOCTRINE OF RESTITUTION IN INDIAN CONTRACT ACT
Section 65 of Indian Contract Act elucidate the Doctrine of Restitution. According to that doctrine when a contract becomes void and the person who has gained some benefit out of it, he has to reimburse the same to the person from whom he received it. It is clear from the section that their should be a contract between the parties which later become void. If there is no contract this doctrine will not be applicable. It is important to note that those contracts which are ab initio i.e void from the very beginning will not invite section 65, it is mandatory that the contract becomes void at later stage. Supreme court in Kujiu Collieries limited v. Jharkhand mines limited ruled that a agreement which was discovered to be void at later stage will invite section 65 and in such a case the advantageous person is bound to restore the victim.
In Case of an Infant, if he misrepresented his age and obtains a property, it can be restored from him to the extent that the property was in his possession but if he has sold the property or converted them he cannot be made to repay the value of the goods, because it would amount to enforcing a void contract as according to Indian Contract Act a minor cannot enter into contract and any contract by him will be regarded as void ab initio.
In the Case of Leslie (R) Ltd v Sheill (1914) 3 KB 607 “an infant deceived money lenders by telling them about his age and got them to lend 400 Euro on the faith of his being adult”. When they attempt to recover the amount of principal and interest money as damages for the fraud they failed as the Doctrine of Restitution do not apply where the infant has obtained money instead of goods.
APPLICABILITY OF SECTION 65 OF INDIAN CONTRACT ACT
Doctrine of Restitution will come into effect only when the agreement becomes void at the later stage, and some benefit has been enjoyed by the defendant causing loss or harm to the plaintiff. If a major and a minor has entered into contract knowing that the minor has not attained the age of majority then this doctrine can never be applied. This was explained in the case of Rajasthan Ltd v Sh Pala Ram Gupta. It can be understood from above that if a contract is void from the beginning then this doctrine will not came into effect.
Three conditions are to be fulfilled
- There must be valid contract between the parties, which become void at the later stage.
- Their must be some consideration in the contract.
- There should be failure to perform the part of contract due to uncertain event.
There are some exceptions to this doctrine.
- This doctrine will not be applicable where the contract is void from the beginning. The same was explained in Rajasthan Ltd v Sh Pala Ram Gupta.
- When an agreement has been entered into between the incompetent parties. An agreement between an intoxicated person, a minor or person suffering from insanity will not invite this doctrine.
- If one of the parties needs to provide some honest money as collateral and then breaches the contract: This clause involves situations such as paying application fees for a residential plan. Now, if a person does not allocate funds in the future, the funds from their application will also be confiscated and they will not be able to claim their previous deposit by revoking the principle of return.
- Mohoribibi v. Dharmodas Ghose, ILR (1903) 30 Cal 539 (PC)
The plaintiff, a minor, who mortgaged his house to defendant, a lender, to secure a loan of INR 20,000/-. Someof this money was prepaid to him prior to. In considering the proposed prepayment, the attorney representinglender received information indicating that the plaintiff was still a minor. After, the infant initiated this lawsuit, claiming that he was a minor when the mortgage was foreclosed in, so the mortgage must be cancelled.
The Privy council held that, this doctrine is only applicable to contract which are voidable and cannot apply to the agreement of a minor, which is completely void.
2. Hari Singh v Dewani Vidyawati AIR 1960 J&K 91.
It was held that recovery of rent paid in advance under a lease which could not be completed on account of partition. The recovery was allowed under section 65 as benefits received under a contract which become void.
From above we can conclude that, when the contract become void at the later stage Doctrine of Restitution helps the plaintiff to reclaim what he has given to defendant as consideration when the contract is valid. There are some conditions that should be fulfilled to bring this Doctrine into effect. If a minor misrepresented his age and enter into contract, the property can be restored from him only to that extent that it was in his possession but if he has sold the property the value cannot be reclaimed. From my opinion this rule should be strictly amendment and even the value of goods can be claimed from the minor.