Quantum meruit



Quantum meruit literally means 'what the job is worth'. Under a quantum meruit claim, a contractor is entitled to a fair and reasonable sum for work performed and materials supplied.


When can a claim on a quantum meruit arise?



A quantum meruit claim arises if there is no specified sum to be paid for work done under an agreement between the parties. However, it can arise even where there is a contract if:

  • there is an express agreement to pay a reasonable sum;
  • work is done outside the contract, at the request of the owner; or
  • the contract is later found to be void or unenforceable.

The following are examples of when a claim for quantum meruit may arise on a building project:

  • where additional work is carried out by a contractor at the request of the principal and the work does not fall within the scope of the power to order variations contained in the contract;
  • where the contract is rendered impossible to perform (normally because of some unusual event, after the contract is executed, which the parties could not foresee);
  • where work has been performed in the expectation of the making of a contract, but no contract is entered into; or
  • where the party requesting the works wrongly terminates the contract or performs such a fundamental or serious breach as to allow the party performing the works to terminate the contract.


What is a reasonable sum?



The courts take several factors into account in considering what is a reasonable sum. These include:

  • the commercial rate for the work;
  • site conditions;
  • whether the contract refers to certain prices (or formulas);
  • conduct of parties; and
  • quality of work.

Quantum meruit is intended to deliver justice to an aggrieved party, and accordingly, the overall amount awarded will often depend on what is just in the circumstances. This may mean that the contractor may be awarded the full value of the work, only his costs or, in some circumstances, nothing at all. Accordingly, it is not uncommon in legal proceedings to request a quantum meruit alongside normal damages for a breach of contract.


CASE STUDY



Sopov v Kane Constructions Pty Ltd (No 2)

[2009] VSCA 141



Facts


  • The appellant engaged the respondent as contractor in a construction project.
  • The appellant repudiated the contract by wrongly calling on the respondent's bank guarantee, in response to which the respondent terminated the contract and claimed damages for quantum meruit.

Result


  • The Court of Appeal applied the NSW Court of Appeal decision in Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 which provided that an innocent party who accepts a defaulting party's repudiation has the option of claiming either damages for breach of contract, or a quantum meruit for the fair value of work done.
  • The initial contract price was held to be only evidentiary for the value of work done - a repudiating party cannot invoke a contract that it has repudiated to impose a ceiling on amounts recoverable.
  • In order to recover amounts for work done, the respondent had to prove the total costs incurred in carrying out the works, and that those amounts were fair and reasonable in the circumstances. It did not matter that the work performed was outside the contract's scope.
  • Notably, the court did not allow the respondent a 10% margin for overhead and profit.
  • With respect to the reduction of damages for delay, the court held that the relevant question was what would have been a reasonable time to complete the contract under ordinary circumstances, and to what extent the time for performance was affected by events outside of the contractor's control.

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Updated 15 July 2014