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QUANTUM MERUIT CLAIMS: WHAT THE WORK IS WORTH
BRYAN PICKARD
Greenhalgh Pickard Solicitors and Accountants
For more information, contact Greenhalgh Pickard Soliciters and Accountants on 07 5444 1022 or visit www. greenhalghpickard. com. au
In the last issue of this magazine I discussed claiming payment under a contract. In certain circumstances, a contactor may make a claim that does not rely on the contract but on the‘ quantum meruit’.
The term‘ quantum meruit’ means‘ what the work is worth’ and is an action for the payment of the reasonable value of services performed. This type of claim is based on the law of restitution and unjust enrichment. Some of the circumstances where a quantum meruit claim may arise are:
• Where there is work done outside the contract. This is the most common basis for quantum meruit claims. A contractor does additional work or agrees to a variation at the principal’ s request. Often there is no agreed price or the contract is regulated and the formal requirements for a variation have not been carried out.
• Where work under a contract is void, unenforceable or the contract has been terminated. This commonly occurs where the principal repudiates the contract before it is completed and the contractor wants to be paid for work completed but unpaid. Another cause may be where a contract is unenforceable because the contract doesn’ t meet statutory requirements such as being in writing or the contractor is not licensed.
• There is a contract but no price is fixed by the contract or no pricing mechanism included in the contract.
• Where there is a quasi-contract. This arises when work may have been started but all essential terms have not been agreed.
In making a quantum meruit claim the following things must be established:
• The principal must have received a benefit from the work done.
• Expenses must have been incurred by the contractor to provide the benefit.
• It would be unjust for the principal to retain the benefit without paying for it.
While it is recognised that a quantum meruit claim is for the reasonable cost of the work that has been done, there are differing views as to what constitutes‘ reasonable cost’. Is it the actual value of the work done or the cost to the contractor? Does it include profit and overheads? Is it the value the work has added to the project? Should it be the full commercial rate? What if the work has no value to the principal? In deciding what is a reasonable cost, such things as the commercial rate for the work, site conditions, whether there are prices, rates or formulas in the contract, the conduct of parties and the quality of work may be taken into account.
It is important to note that a quantum meruit claim cannot arise if there is an existing contract on foot and the parties have agreed to a price. Where there is a building dispute it is common to bring a claim both in contract and quantum meruit. The reason for this is to cover work that may be determined as being outside the contract.
It is also important to note that in some jurisdictions residential building legislation may exclude quantum meruit claims. A reason for doing so is to‘ punish’ contractors where they carry out work without complying with requirements that make a contract enforceable. For example, no written contract or a contractor not being licensed. In Queensland, the Domestic Building Contracts Act 2000 purported to do this, however, the Court of Appeal determined that if a law removing a common law right was to be effective there should be a clearly expressed intention in the law. This was not the case with the Queensland law.
While a quantum meruit claim may appear to provide a means of fixing mistakes or sloppy business practice there can be problems in relying on this remedy. There are no clear guidelines on what may be recovered as reasonable costs and cases show that the particular facts are likely to have an important affect on the outcome.
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