State of West Bengal v B.K. Mondal & Sons (1962)

S. 70 is the workhorse of Chapter V of the Contract Act. It reads:

"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."

B.K. Mondal states the three conditions of liability in the form every Indian court has used since. It is also the decision that saved thousands of small contractors from a very particular injustice — the government department that asks for work, takes the work, and then pleads that its own officers failed to execute a contract in the constitutional form.

For the MU paper it does double duty: leading authority on s. 70 in the quasi-contract module, and the standard illustration of what happens when a government contract does not comply with Art. 299.

The claim was for Rs 19,325, which tells you most of what you need to know: a small builder had to litigate to the Supreme Court to be paid for work everybody agreed he had done.

B.K. Mondal & Sons was a firm of contractors. An officer of the Government of West Bengal, acting for the Civil Supplies Department, asked the firm to put up a number of structures — a kutcha road, a guard room, an office, a kitchen, a room for clerks and a set of storage sheds. There was correspondence and there were requests, but there was no contract executed in the manner s. 175(3) of the Government of India Act 1935 required for contracts on behalf of the Province: expressed to be made by the Governor and executed on his behalf by a person authorised to do so. (The provision is now Art. 299 of the Constitution, in identical substance.)

The firm built the structures. The Department took them over and used them. When the firm asked to be paid, the State's answer was not that the work was defective or unwanted, but that there was no enforceable contract at all because the constitutional formalities had not been observed, and that the State was therefore under no liability.

The firm fell back on s. 70. It succeeded below, and the State appealed.

1. What are the conditions on which liability under s. 70 arises?
2. Is a claim under s. 70 a claim on a contract?
3. Does allowing a s. 70 claim against the State defeat the mandatory constitutional requirement (then s. 175(3), now Art. 299) that government contracts be made in a particular form?
4. Does the word "lawfully" in s. 70 exclude a claim arising out of a transaction that failed to comply with that requirement?

The State's argument had a certain force. The formalities in s. 175(3) exist for the protection of public revenue: they ensure that the State is bound only by officers authorised to bind it, and only in writing. If a contractor who has no valid contract can recover the whole value of his work under s. 70, then the section has quietly repealed the constitutional safeguard. Every unauthorised oral arrangement would be enforceable in substance, merely under a different name. The State further argued that services rendered under a transaction that contravened a mandatory statutory provision could not have been rendered "lawfully" within the meaning of s. 70.

The contractor's answer was that he was not suing on a contract at all. S. 70 sits in a Chapter headed "Of certain relations resembling those created by contract". The obligation it creates is imposed by the statute on the person who has taken the benefit; it does not depend on agreement, offer, acceptance or consideration. Enforcing it therefore enforces nothing that s. 175(3) forbids.

The Supreme Court, in the judgment of Gajendragadkar J (afterwards Chief Justice), dismissed the appeal and held the State liable.

On the conditions of liability the Court laid down the formulation now quoted everywhere:

"It is plain that three conditions must be satisfied before this section can be invoked: (1) a person should lawfully do something for another person or deliver something to him; (2) in doing the said thing or delivering the said thing he must not intend to act gratuitously; and (3) the other person for whom something is done or to whom something is delivered must enjoy the benefit thereof."

All three were satisfied. The work was done at the Department's request and lawfully; nobody suggested the contractor meant to build storage sheds for the Government as a gift; and the Government had accepted the structures and used them.

On the constitutional point the Court held that the State's freedom of choice at the moment of delivery is the answer to the objection. The State "had the right to reject. It could have called upon the contractor to demolish the storage sheds and take away the material used; but if the State accepted the storage sheds and used them and enjoyed their benefit, then different considerations come into play and Section 70 can be invoked."

And on the alleged circumvention of s. 175(3):

"Once it is realised that a cause of action for a claim for compensation under Section 70 is based not upon the delivery of the goods or the doing of any work as such but upon the acceptance and enjoyment of the said goods or said work, it would not be difficult to hold that Section 70 does not treat as valid the contravention of Section 175(3) of the Act."

The Court added, with an eye on practical government: "Any other approach would not only cause injustice to a private party, but would also hamper Government business." Officers of a modern State constantly make small arrangements, sometimes in emergencies, often orally or by correspondence; if in every such case the private party were left without remedy, no one would deal with government at all. But the Court was careful to say that it was not detracting from the binding character of the constitutional provision — "like ordinary citizens even the State Government is subject to the provisions of Section 70."

1. Liability under s. 70 arises when three conditions are cumulatively satisfied: (i) something is lawfully done for, or delivered to, another; (ii) the doer does not intend to act gratuitously; (iii) the other person enjoys the benefit of it.
2. A claim under s. 70 is not a claim on contract. It is a statutory obligation, and it can therefore be enforced against the State even though no contract was made in the form required by s. 175(3) of the 1935 Act (now Art. 299).
3. The foundation of the claim is not the doing of the work but the voluntary acceptance and enjoyment of the benefit. That is why the section does not validate any contravention of the constitutional formality: it fastens on a different fact.
4. Government and corporations are within the section as much as individuals; what s. 70 prevents is unjust enrichment. A minor is outside it, both because his case is separately provided for by s. 68 and because the voluntary acceptance on which s. 70 rests cannot be predicated of him.

The pivot of the case is the distinction between an obligation created by agreement and an obligation imposed by law on a set of facts.

If the s. 70 claim were contractual, the claimant could sue for specific performance, could claim damages for breach, and would be met by every defence available against an invalid contract. In fact he can do none of these. There is nothing to perform and nothing to break. All he can claim is compensation for the benefit accepted. That limited remedy is the signature of a statutory, restitutionary obligation, and it is why the section sits in a Chapter about relations resembling contract rather than in the law of contract proper.

The word "lawfully" did not save the State. The Court held that "lawfully" is not surplusage, but the work it does is to require a lawful relationship between the parties out of which the acceptance and enjoyment arise. It does not mean a claim fails merely because a formality attaching to a possible contract was not observed. The object of the work was not forbidden by law; it was the construction of sheds which the department then used.

Note the second condition carefully, because it decides most problem questions. The claimant must have contemplated payment from the beginning. A person who acts as a volunteer, or out of friendship, cannot change his mind afterwards and send a bill — the point of illustration (b): A saves B's property from fire and gets nothing if the circumstances show he meant to act gratuitously.

Students are often asked to distinguish s. 70 from quantum meruit. The honest answer is that they overlap heavily without being identical.

Quantum meruit — "as much as he has earned" — is a claim for the reasonable value of work done or goods supplied where there is no enforceable agreement fixing the price, or where a contract has been discharged before the agreed remuneration became payable. In Indian law it operates partly through s. 70, partly through s. 65 (restoration of benefit under an agreement discovered to be void), and partly through the principle that a party prevented by the other from completing performance may sue for what he has done.

The practical connection is the measure of relief. S. 70 gives "compensation in respect of" the thing done or delivered, which the courts read as its reasonable value. In Piloo Dhunjishaw Sidhwa v Municipal Corporation of the City of Poona the Supreme Court, applying B.K. Mondal, held a municipal corporation liable for spare motor parts supplied without a contract complying with the governing municipal statute, and approved the rule that a supplier without an enforceable contract "is entitled to a money equivalent of the goods delivered, assessed at the market rate prevailing on the date on which the supplies were made". The invoice rates were taken as a fair measure, subject to the authority's right to prove the market price was lower. So although the claim is not contractual, the contract price remains good evidence of what is reasonable.

The principle has been applied steadily. Payment has been ordered for extra work done on oral instructions outside the written contract, for work done after a contract was terminated, and where a contract was void for non-compliance with Art. 299. The section cuts both ways: the State has been allowed to recover the cost of training from a candidate who took the training and then refused to join service, and wrongly paid salary or pension has been held recoverable in principle.

The limits are now as well settled as the doctrine.

• Where the goods have been accepted under an existing contract, the remedy is a suit for the price, not a claim under s. 70 — the Supreme Court so held in Union of India v Sita Ram Jaiswal. S. 70 is a residual provision; it does not apply where the parties' rights are governed by a subsisting agreement.
• The claim must be pleaded. Where the plaint contains no averment that there was no contract, or that the contract was invalid, the plaintiff cannot fall back on s. 70 at the hearing.
• There must be a real acceptance and enjoyment of the benefit, and the other party must have had the option to refuse. This is what excludes the minor, and it is why services thrust upon an unwilling recipient found nothing.
• There must be some lawful relationship between the parties; a stranger conferring an unrequested benefit does not acquire a claim.
• Where neither a contract nor any service can be shown, no relief lies at all — as in Devi Sahai Palliwal v Union of India.

Later decisions have also declined to stretch the neighbouring statutory fictions by analogy. In Union of India v Amar Singh the Court held a railway administration holding wagons of goods to be a contractual bailee and refused to treat it as a finder of goods — the same discipline that keeps s. 70 within bounds.