Three facts must be established
Indian Contract Act section 70 addresses a lawful act done, or thing delivered, for another person without an intention to act gratuitously, where the recipient enjoys the benefit. The consequence is compensation in respect of, or restoration of, the act or thing. It is not a statutory tariff equal to every invoice issued without a signed purchase order. A company assessing such a demand needs both a liability analysis and a separate valuation working. IndiaCode: Indian Contract Act, 1872, section 70.
Reconstruct the commercial history
Collect instructions, delivery records, correspondence about charging, acceptance, use, rejection and return. Identify the person for whom the act was done and whether that person enjoyed it. A supplier's internal cost sheet does not alone establish the recipient's benefit. Conversely, a missing internal procurement approval should not end the review where the company knowingly retained and used the work. The legal character of the arrangement and any valid contractual terms must be examined before treating section 70 as the correct route. IndiaCode: Indian Contract Act, 1872, section 70.
Non-gratuitous intention needs evidence
Preserve the circumstances at the time of the act or delivery. A later invoice is not conclusive proof that an originally free service was chargeable. The statutory fire-rescue illustration makes the gratuitous-intention issue concrete. Corporate files should distinguish paid trials, unsolicited demonstrations, promotional gifts and accepted commercial work. Avoid assuming every benefit received creates an obligation where the lawful-act or intention requirements are absent. IndiaCode: Indian Contract Act, 1872, section 70.
Value and remedy are separate from the trigger
Once the necessary facts are supported, identify what compensation or restoration is appropriate. A claimed market value, cost-plus proposal and agreed settlement are different measures and need their own evidence. Section 70 itself supplies no fixed profit percentage, interest rate or prescribed number of payment days. The numerical models below assume values solely to show reconciliation; they are not judicial findings or automatic recovery entitlements. IndiaCode: Indian Contract Act, 1872, section 70.
Track restoration and compensation without double recovery
Where goods are returned, retain quantity, condition and acknowledgment evidence. Where part was consumed or services cannot be physically returned, separately document the proposed compensation and any dispute. Credit payments and restoration already made against the relevant obligation. Do not simultaneously count the full goods value and the same returned quantities as an additional cash claim. Tax treatment and accounting recognition require their own applicable analysis. IndiaCode: Indian Contract Act, 1872, section 70.
Close the dispute file on supported facts
Prepare a short issue memo covering lawful performance, intention, benefit, remedy and valuation support. State admitted amounts separately from disputed amounts. Record the signatories and scope of any settlement; do not infer waiver or accord from a spreadsheet balance alone. Where the statutory ingredients are contested, preserve the evidence for legal review rather than presenting an invoice total as an established debt. IndiaCode: Indian Contract Act, 1872, section 70.
Applicable primary references
IndiaCode: Indian Contract Act, 1872, section 70
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Accepted service with evidenced value
Assume all section 70 ingredients are established and ₹1,20,000 is the supported compensation value. Against ₹40,000 already paid, the remaining amount is ₹80,000. The supplier's higher invoice would require its own justification.
Illustrative example 2: Part restoration
A company received 100 units, returns 60 unused units and retains 40. At an assumed supported value of ₹500 per retained unit, the compensation model is ₹20,000 alongside restoration of 60 units, not ₹50,000 plus the returned goods.
Illustrative example 3: Price claim versus evidence
The claimant invoices ₹2 lakh; the parties' supported valuation working is ₹1.60 lakh. The ₹40,000 gap is disputed. Section 70 does not automatically select either number merely because one is on an invoice.
Illustrative example 4: Gratuitous activity
A genuinely free demonstration costs the supplier ₹30,000 and benefits the company by an estimated ₹50,000. On the stated gratuitous-intention facts, the section 70 compensation claim is ₹0; subtracting cost from benefit to demand ₹20,000 would not cure the missing ingredient.
Illustrative example 5: Separate beneficiaries
Assume supported non-gratuitous services benefit Company A by ₹90,000 and Company B by ₹60,000. The allocation totals ₹1.50 lakh, but each recipient's ingredients and liability must be proved separately; group ownership does not establish joint liability.
Illustrative example 6: Settlement reconciliation
Assume a properly documented compensation settlement of ₹3 lakh, with ₹1.25 lakh paid initially and ₹0.75 lakh later. Total payments are ₹2 lakh and the remaining settlement balance is ₹1 lakh, subject to its actual terms.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the correct recipient | Separate legal entities and actual beneficiaries. |
| 2 | Locate the act or delivery | Retain work records and delivery evidence. |
| 3 | Check lawfulness | Identify any issue with the lawfulness of the performance. |
| 4 | Test charging intention | Read contemporaneous communications about payment or free supply. |
| 5 | Prove enjoyment | Document use, retention or consumption of the benefit. |
| 6 | Check contractual route | Review valid agreements before relying on section 70. |
| 7 | Support valuation | Distinguish invoice, cost, market evidence and settlement value. |
| 8 | Reconcile restoration | Record quantities returned and recipient acknowledgment. |
| 9 | Credit prior payments | Prevent duplicate compensation or recovery. |
| 10 | Approve resolution | Retain the legal analysis and signed settlement where applicable. |
Sixteen practitioner FAQs
1. Does absence of a PO defeat every claim?
No. The statutory ingredients require their own factual examination.
2. Does an unsolicited invoice prove liability?
No. An invoice alone does not establish all ingredients.
3. Must the act be lawful?
Yes; lawfulness is part of section 70's wording.
4. Must the supplier intend to charge?
The act or delivery must not have been intended gratuitously.
5. Must the recipient enjoy the benefit?
Yes; document the actual benefit enjoyed.
6. Is supplier cost always compensation?
No automatic cost-based formula is prescribed by section 70.
7. Is invoice price always compensation?
No automatic invoice-price rule is prescribed either.
8. Can the thing be restored?
Restoration is an expressly stated alternative in the provision.
9. How should partial returns be handled?
Separate returned quantities from retained or consumed benefits and support the valuation.
10. Can a free demonstration be charged later automatically?
A later invoice does not by itself change the original gratuitous intention.
11. Does group ownership make all companies liable?
No; identify the actual recipient and prove the relevant facts.
12. Does this section prescribe interest?
It does not itself specify a fixed interest rate for every claim.
13. Does it prescribe a standard payment deadline?
No universal number of days is stated here.
14. Should an existing contract be ignored?
No. Examine the contractual relationship and correct legal route first.
15. Is a compensation working the same as an accounting entry?
No. Apply the relevant recognition and measurement requirements separately.
16. What should a reviewer sign off?
The ingredients, remedy, valuation support and reconciliation of restoration and payments.
Conclusion
A missing purchase order does not settle a section 70 claim. Examine lawful performance, non-gratuitous intention and actual enjoyment of the benefit before quantifying relief.