By Jalaj Tokas
Published On: September 29, 2021 at 12:28 IST
Introduction
Chapter V of the Indian Contract Act, 1872 deals with some relations resembling the ones which are created by contract. It resonates with obligations which are known as Quasi Contracts. The Chapter adds that a person, under certain conditions, is obliged to compensate another person despite the absence of a valid contract between them. The reasoning lies on the fact that ‘no one should derive an unjust benefit at the cost of other.’
An action for a Quasi-Contract resembles the one in a contractual relationship. Therefore, a right of action lies against a person who derives such a benefit. Hence, it is understood that Quasi Contracts are fictional contracts where no prior meetings of minds and agreement takes place between the parties and in which the obligations on the parties are imposed by an order of the court.
The Court in State of West Bengal Vs B.K. Mondal,[i] held that as the finder and owner somewhat enter into a quasi-contract, the obligation is irrespective of the arrangement and rests on justice, honesty and good faith. It was contended that because of this the principle of “unjust enrichment” must be prohibited by statute. The quasi-contract or restitution was retained in India as the third form of law that was not based on contract or tort.
The Indian Contract Act, 1872 deals with quasi-contractual relationships and obligations under Section 68-72. The following write-up covers one such category of quasi-contractual obligation- Finder of Lost Goods.
Who is a Finder of Lost Goods?
A “Finder of Lost Goods” is a person who finds goods belonging to another person and takes them into his own custody. The underlying interpretation of the term- finder is the person who presumably does not know the true proprietor of the goods. In other words, the finder of lost goods is a person who finds the goods of another person presumably not knowing the true owner of the goods at that point.
The finder is bound to return the goods to the owner as owner’s title is better than his. However, the individual who acquires possession of lost goods is the best owner and has superior rights on the products over anyone except the actual owner. Thus, if a finder of a jewel gives the jewel to a jeweler for being valued, he has a right to recover its value from the jeweler, if the latter, refuses to return the same.
During this circumstance, one must not forget that the finder of lost goods is just the apparent owner. In fact, the finder’s title on the products can also be forfeited upon discovery of the true owner.
A true owner’s title however remains unaffected by the fact that the products have been lost. A finder’s title is contingent upon the possible discovery of the verity owner. Therefore, the finder cannot transfer the title to a different person.
Position of Finder of Goods
Under English Law, the mere act of finding lost goods isn’t generally termed as a bailment. However, the finder is dealt with as a bailee, who gratuitously for some reason based on an inferred request from the owner, takes the possession of the goods on behalf of the owner.
Although there is no valid contract between a finder and the owner, yet Section 71 of Indian Contract Act, 1872 mentions and fixes certain responsibilities for the finder of lost goods.
The Section reads as follows:
“A person who finds goods belonging to another, and takes them into his custody, is subject to the same responsibility as a bailee.”
It was clearly mentioned in State of Bombay Vs Memon Mahomed Haji Hasam[ii] that the position of the finder of goods is similar to that of a bailee.
There can, therefore, be bailment and the relationship of a bailee in respect of specific property without there being an enforceable contract. Nor is consent indispensable for such a relationship to arise. A finder of goods of another has been held to be a bailee in certain circumstances.
Responsibility and Duties of the Finder of Goods
A finder of goods finds himself in a position of a bailee. In other words, the finder of the goods is subject to the same rights, responsibilities and liabilities as that of the bailee of goods. Therefore, the finder of goods is bound to follow and fulfill certain duties and simultaneously owes some responsibility towards them and towards the original owner.
Therefore, the duties and liability of a finder is treated at par with the bailee. The finder’s position, hence, has been considered alongside bailment. Some of them have been mentioned below-
- It unmistakably implies that the finder is bound to take as much care of the goods as a man of ordinary prudence, under similar circumstances, would take of his own goods of the same quantity, quality and value as the goods found by him.[iii]
- In the absence of any special contract, the finder of lost goods is not responsible for any loss, destruction or deterioration of the goods, if he has takes the same amount of care as it is described in Section 151.[iv]
- However, if the goods are not returned to the true owner due to fault on the finder’s part or due to any loss, destruction or deterioration of goods then the finder is responsible for compensating the owner for the same.[v]
- Duty Not to Set Up Jus Tertii. The finder is expected not to set up an adverse title.
- Section 154 talks about liability of the finder of goods if he makes an unauthorized use of goods. If found guilty then he is liable to pay compensation to the owner of goods for any damage to the goods from or during such unauthorized use of them.
- Deliver any accretion/profit earned on the goods, on its return to their owner.
- Not to mix up the goods with his own goods. If it is done with the consent of the actual owner of the bailed goods, then the finder and the owner of goods must have the proportionate interest in the mixture so produced.[vi]
- The finder, like the bailee, is bound to return the goods to its true owner, if he can, after a reasonably searching for the owner. It is the duty of the finder of the goods to return or deliver the goods found to the true owner as per his directions before the expiration of the time period specified by him.[vii]
Rights of the Finder of Goods
Section 168 and Section 169 protect and secure the interests of the Finder of Goods. The rights have been envisaged below-
- Finder’s Right of Lien and Compensation
“The finder of goods has no right to sue the owner for compensation for the trouble and expense voluntarily incurred by him to preserve the goods and to find out the owner, but he may retain the goods against the owner until he receives such compensation, and where the owner has offered a specific reward for the return of goods lost, the finder may sue for such reward, and may retain the goods until he receives it.”[viii]
Even if no specific has been offered, but, if after the goods are found, the owner promises to pay something to the finder for his services, the finder can enforce this promise under Section 25(2).
- Right to Sell the Goods Found
“When finder of thing commonly on sale may sell it.—When a thing which is commonly the subject of sale is lost, if the owner cannot with reasonable diligence be found, or if he refuses upon demand, to pay the lawful charges of the finder, the finder may sell it— —When a thing which is commonly the subject of sale is lost, if the owner cannot with reasonable diligence be found, or if he refuses upon demand, to pay the lawful charges of the finder, the finder may sell it:
- When the thing is in danger of perishing or of losing the greater part of its value, or
- When the lawful charges of the finder, in respect of the thing found, amount to two-thirds of its value.”[ix]
The finder of goods has been authorized to sell the goods found by him when:
- The owner cannot with reasonable diligence be found, or if he refuses, upon demand, to pay the lawful charge of the finder,
- The goods are in danger of perishing or of losing the greater part of their value; or, in case the goods are not of perishable nature, but the lawful charges of the finder, in respect of the thing found, amount to two-thirds of its value.
Although, the Indian Contract Act mentions the same duty of the finder as the bailee of missing goods, yet in the case of Kanhya Lal Sain Vs Registrar Examination, R.H.C.,[x] it was held that the aforementioned provision does not specifically lay down the finder’s rights and thus a bailee may be interpreted as a finder of lost goods; however, the two are not the same.
Ambiguity of Section 71
The underlying ambiguity and misunderstanding emerge in Indian law as the responsibility of the finder of lost goods is equated with the same liability as that of a bailee. Hence, making them interchangeably being used.
It is often contended that both, the finder as well as the bailee, entered with different circumstances into a contract, therefore the treatment they shall receive should also be different. Hence, the finder of goods shall not have the same obligation towards the owner as given to the bailee.
In the case of Ashu Kumar Pathak Vs Rajasthan High Court Jodhpur[xi], the Honorable Court interpreted Section 71 of the Indian Contract Act, 1872 differently and established that Section 71 doesn’t provide that the position of the finder of missing goods is equivalent to that of a bailee. Instead, it clearly mentions that he is liable to the same duty as a bailee.
The Indian Contract Act, 1872 places on the bailee the duty of the finder of lost goods at Pari passu to ensure that the finder of such goods does not benefit unlawfully or arbitrarily from the possession of another person. But it also doesn’t categorically mention that the finder of lost goods is under a bailment contract.
Conclusion
The concept of Finder of Goods is a part of quasi-contractual relationship, resembling those which are created by a valid contract. It is noteworthy, that the Finder of Goods has the same criteria of responsibilities and duties towards the innocent parties, here the owner, as given to the bailee. This is something which is laid down in the Indian Contract Act, 1872 under Section 71.
A fabric of rights and obligations surrounding the finder and the owner is woven based on the concepts of justice, good faith and wrongful enrichment law, thereby establishing a non-consensual quasi-contract between the two.
Even though in Indian law, the finder of lost goods finds its traces. Yet, it still struggles to have a formal law in this respect and has been held as the third form of law not dependent on contract or tort. This often causes misunderstandings and creates ambiguity between a Contract of Bailment and the discovery of missing goods, which as a result are used interchangeably. Therefore, in this respect, the procedural legislation leaves a margin for more study and calls for positive reinforcement for the same.
[i] West Bengal Vs B.K. Mondal, A.I.R. 1962, SC.
[ii] State Of Bombay Vs Memon Mahomed Haji Hasam, 1967 AIR 1885.
[iii] The Indian Contract Act, 1872, s. 151.
[iv] The Indian Contract Act, 1872, s. 152.
[v] The Indian Contract Act, 1872, s. 161.
[vi] The Indian Contract Act, 1872, s. 155.
[vii] The Indian Contract Act, 1872, s. 160.
[viii] The Indian Contract Act, 1872, s. 168.
[ix] The Indian Contract Act, 1872, s. 169.
[x] Kanhya Lal Sain Vs Registrar Examination R.H.C, 2015 Raj 4161.
[xi] Ashu Kumar Pathak Vs Rajasthan High Court Jodhpur, 2015 Raj 4161.