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Time to pay
04/10/2005 The Star Articles of Law with Bhag Singh
In an earlier article, situations were highlighted where even though work
had been done or a benefit conferred by one party on another, there was no
right to payment by the party conferring the benefit.
Here the reverse situation will be discussed. The party that benefits may
not have agreed to make payment but payment must nevertheless be made.
Therefore if a person receives goods or services or money or for any other
benefit, it is not always open to such a person to say that he is not liable
to pay because he has not asked for the goods or services, and if he has,
that he has not agreed or undertaken to pay.
Whilst such a situation may appear not to be unfair from the point of view
of the person who has received the benefit, it is also not contrary to
notions of fairness and justice that a person is not to have the benefit,
which was not intended to be conferred.
One basic example is in the case of what are regarded as necessaries. Such a
person may be incapable of even agreeing to pay by reason of unsoundness of
mind or not being of full age or for any other reason being incapable of
acting.
In this regard Section 69 of the Contract Act 1950 provides: “If a person,
incapable of entering into a contract, or anyone whom he is legally bound to
support, is supplied by another person with necessaries suited to his
condition in life, the person who has furnished such supplies is entitled to
be reimbursed from the property of such incapable person”.
Quite apart from situations where a person may do work gratuitously there
are many other situations where work is done or services rendered without
payment being agreed to or discussed. Yet it is not always intended that
there should be no payment.
Such occurrences are encountered in the context of the building industry
where work has proceeded within the expectation and sometimes even an
assurance that an award will be made. But when it is not, what are the
consequences?
Courts have begun to view such relationships as quasi contracts where the
Court will look at the true facts and ascertain from them whether or not a
promise to pay should be implied, irrespective of the actual intentions of
the parties.
In Craven Ellis vs Canons, Ltd the plaintiff was appointed managing director
of a company by an agreement, which also provided for his remuneration. By
the articles of association of the company, each director was required to
obtain his qualification shares within two months after his appointment.
Neither the plaintiff nor the other directors obtained their qualification
shares within two months or at all.
The plaintiff, having done work for the company, claimed to recover the
remuneration provided for in the agreement, or alternatively, on the basis
of a quantum merit.
It was held that the fact that the plaintiff did the work under an agreement
which was in fact void did not disentitle him from recovering on a quantum
merit. Greer, L.J. said: “... the obligation to pay reasonable remuneration
for the work done when there is no binding contract between the parties is
imposed by a rule of law and not by an inference of fact arising from the
acceptance of service ...”
The fact that the intention of the parties is irrelevant is even more
vividly illustrated by the case of Upton-on-Severn Rural District Council vs
Powell.
The appellant’s farm was in the Upton police district, but in the Pershore
and not the Upton fire district. A fire broke out on the farm, and the
appellant telephoned to the police inspector at Upton and asked for the fire
brigade to be sent.
The Upton fire brigade was informed, and it went to a fire outside its own
area.
At the time when the brigade was summoned, all the parties concerned were
under the impression that the farm was in the Upton fire district. For the
Upton fire brigade, it was contended that a contract had been created by
implication, under which it was entitled to be remunerated for its services.
It was decided that the appellant must be treated as having asked for the
Upton fire brigade to be sent to his farm, and the fact that at the time the
parties thought that the fire was in its area did not prevent there being a
contractual relationship. The appellant was therefore liable under an
implied contract to pay for the brigade’s services.
This situation is encapsulated in our own Contracts Act 1950 so that in such
a situation, a person is entitled to be pay, irrespective of any absence of
any prior agreement. Section 71 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”.
Yet another situation where a person is entitled to be paid without prior
agreement is where he fulfils an obligation of another in circumstances
where it is in his interest to do so. Thus section 70 provides: “A person
who is interested in the payment of money which another is bound by law to
pay, and who therefore pays it, is entitled to be reimbursed by the other”.
A final situation is where a person becomes a guarantor. Seldom does a
person who gives a guarantee in a social context require the person whose
obligation is guaranteed to sign another agreement to reimburse the
guarantor if he becomes liable to pay.
This happens more often in the expectation that the contingency will not
arise and that all will be well. But what if it happens? And the Guarantor
pays up? Can he be faced with a situation where the person on whose request
the guarantee was given turns round and says that he never signed anything
to say that he will reimburse the Guarantor?
One would think that this would be morally unimaginable. However, it can
happen. Apart from the moral obligation the law requires the person, at
whose request the guarantee was given, to be responsible. This is provided
by way of Section 98 of the Contracts Act 1950.
By way of explanation the word “principal debtor” here refers to the person
whose obligation is guaranteed. Thus where a person receives a scholarship
in which connection a guarantee must be obtained, the person receiving the
scholarship would be a principal debtor.
It will therefore be seen that by virtue of all these provisions a person
will be liable to make payment to another even though he has never agreed to
do so orally or in writing. |
