Under contract law in most jurisdictions, a quasi-contract is not considered a true contract because the parties have not mutually agreed to enter into a transaction. Essentially, a quasi-contract serves as a legal substitute for a true contract, and it exists as a result of a court order. Quasi-contracts are typically formed for the purpose of keeping one party from becoming unjustly enriched to the detriment of the other party. A quasi-contract may also be referred to as an implied-in-law contract or an implied contract.
To illustrate, assume that John Doe is hired to put new shingles on a client’s roof. He spends a week on the job, under the supervision of Suzy Smith, who is the homeowner, only to find out that he re-shingled the wrong house. Even though she watched John work on her house for a whole week, Suzy refuses to pay John on the grounds that she never entered into a contract with him. If John sues Suzy for damages, the court would likely create a quasi-contract between John and Suzy and require Suzy to pay for the reasonable cost of the shingling materials and John’s labor.
With a standard contract, both parties are generally in agreement on the subject matter, and they have entered into a written or oral agreement prior to any work being performed. A key element of a quasi-contract, however, is that one of the parties did not actually intend to enter into the contract. Even though this mutual assent is not present, the court decides to create a contract in order to make things fair for each of the parties. Quasi-contracts are customarily created pursuant to a written court order.
A quasi-contract is distinct from an implied-in-fact contract. As with quasi-contracts, implied-in-fact contracts are not traditional, written contracts. With an implied-in-fact contract, however, the words and actions of the parties indicate that they each agreed to enter into a transaction. This element of mutual agreement to enter into a transaction generally does not exist with a quasi-contract.
Typically, quasi-contracts are created when disputes over the payment of goods or services arise. The remedy for a quasi-contract is usually limited to whatever is necessary to prevent the unjust enrichment of one of the parties. As a general rule, this means that damages are restricted to the cost of the plaintiff’s labor and materials. Profits are normally excluded on the grounds that it is fundamentally unfair for a party who did not wish to enter into a contract to have to pay profits to the other party.