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Quantum Meruit: A Comprehensive Analysis

Updated on March 10, 2015


Quantum Meruit

General

A quantum meruit claim arises where goods are supplied or services rendered by one person to another in circumstances which entitle him to be recompensed by that other by receiving a reasonable price or remuneration thereof.1 Quantum meruit in its literal meaning signifies as much as he has earned. Where one person has expressly or impliedly requested another to render him a service without specifying any remuneration, but the circumstances of the request imply that the service is to be paid for, there is implied a promise to pay quantum meruit; i.e. so much as the party doing the service deserves. If a person by the terms of the contract is to do a certain piece of work for a lump sum, and he does only part of the contract, or something different, he cannot claim under the contract, but he may be able to claim on a quantum meruit, as if completion has been prevented by the act of the other party to the contract.2 Such actions can be distinguished from damages on the ground that the questions of remoteness or quantification do not arise in relation to them. In this concept the main question that is involved is whether the plaintiff is entitled to an agreed sum, and the defendant will usually raise defences that either the goods were defective, or the work done unsatisfactory.3 This difference is illustrated in a case wherein the hire-purchaser of a car broke his contract by defaulting in the payment of four installments, totalling 42 pounds. 8d. After the owners in one action recovered this sum, they brought another action claiming damages for the hirers repudiation of the agreement. It was held that they were entitled held that they were entitled to succeed in the second action since the two causes of action, for unpaid installments and for damages for repudiation, were quite distinct.4 Both claim for damages and claim based on quantum meruit are for an unliquidated sum. It is usually a matter of procedural tactics whether a plaintiff claims on a quantum meruit in preference to a claim for damages.5 Indian Supreme Court held that the remedy by way of quantum meruit is restitutionary aiming to restore the plaintiff to the position if the contract has never been entered into differs in this respect from the claim for damages which is a compensatory remedy aimed at placing the injured party, as near as may be in the position which he would have been in, had the other party performed the contract. Court further held that the principle of quantum meruit is rooted in English law under which there were certain procedural advantages in framing an action for work done.6 Although the entire performance of the contract by the plaintiff is not in general a condition precedent to his right to demand performance of the defendant, yet it may be so; and in cases where entire performance in the manner specified is expressly made by the contract a condition precedent, the plaintiff cannot sue to recover a compensation for what he has done until the whole is complete. He cannot be allowed to throw over the terms of his bargain and recover on a quantum meruit for doing part only of the stipulated work in the manner specified in the contract.7 In Pakistan courts also recognize the principle of quantum meruit. So Court held in a case that Compensation quantum meruit is awarded for work done or services rendered for work done or services rendered, when the price thereof is not fixed by a contract.8

Requirements for the action

For the maintenance of an action on this ground of agreed sum it is necessary that duty to pay the price must have arisen and determination as to whether this has actually occurred will depend on the terms of the contract itself. A private school taking state scholars had an agreement with the Corporation for payment of fees which stipulated that fees were payable in advance. On the introduction of the comprehensive system, the Corporation withdrew pupils from the school without giving the customary one term's notice. It was held that the headmaster could sue for fees payable in advance.9 Indian Supreme Court has held that in order in to avail of the remedy under quantum meruit, the original contract must have been discharged by the defendant in such a way as to entitle the plaintiff to regard himself as discharged from any further performance and he must have elected to do so.10

Recovery of a reasonable price for goods

Where, under a contract of sale, the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against him for the price of the goods.11 Where the price is ascertainable in a manner provided in s.8 of the Sale of Goods Act, 1979 the appropriate claim is a liquidated demand: the remedy is a the award of the liquidated sum. But where the price is not determined in accordance with s.8, the buyer must pay a reasonable price.12 What is a reasonable price is a question of fact dependent on the circumstances of each particular case.13 The action for a reasonable price for goods is a claim for an unliquidated sum. The remedy is the award of whatever sum the court considers reasonable in the circumstances. If payment is to be made on a certain day irrespective of delivery, then the seller can sue for the price any time after that day.14 The plaintiff was constructing a ship for the defendant which was to be paid for by installments. The seller was held entitled to sue for installments as they became due.15

Conduct of the injured party

The plaintiff can elect to terminate the contract and sue for damages which will take account of any sums payable under the contract but, in such cases, sums due after the contract terminated, under the terms of the contract, cannot be claimed. The plaintiff can elect to treat the contract as still subsisting, and claim for what is due to him under it. In such cases, the plaintiff has done all that is required of him. A seller who has delivered goods can sue for the price. But if the plaintiff has not done all that is required of him under the contract, he cannot bring an action for an agreed sum. A singer wrongfully repudiated a contract with his agent and latter could not continue performance without the co-operation of the singer. Despite the fact that the agent could not perform without the co-operation of the guilty party, he could not be permitted to bring an action for an agreed sum, and could only claim for damages.16 But in other authority it was construed that where one party prevents the other party from performing his obligations under a contract, the other party may sue on a quantum meruit. Thus A principal wrongly revoked his agent's authority before the agent had completed his duties. Held: The agent could recover on a quantum meruit for the work that he had done and the expenses he had incurred in the course of his duties.17 If the plaintiff continues performance after repudiation of the contract by the other party, he may be regarded as having an option and if he exercises that option to continue the contract, he can claim for an agreed sum under the contract.18 The remedy of quantum meruit is, however not available to the party who breaks the contract even though he may have partially performed part of his obligation.19 If a contract is to do work for a lump sum, nothing can be recovered by way of quantum meruit if a part only of the work is done.20

Contractual or restitutionary

A quantum meruit claim may arise in a number of different situations. Professor Winfield pointed out that some of these situations are really contractual, being based upon an implied promise or an agreement. Others, however, are generally cases of Restitution, the law imposing a duty upon one party to recompense the other for a benefit received, without any promise or agreement so to do.21

Substituted Implied contract

When the circumstances of the case and conduct of the parties to an express contract leads to the inference that they have agreed to substitute for it a new contract taking the place of their original contract, an action on a quantum meruit is available to a party who has performed his obligations under the fresh implied contract. Tender and acceptance of a completely different type of cargo from that envisaged by the original contract was held to infer that the parties had entered into a new and substituted agreement. If no quantified remuneration can be spelt out for the new contract, then the law will imply a promise to pay a reasonable sum. There was a contract between S, a shipowner, and B, a charterer, for the carriage of a certain consignment of steel, at an agreed rate of freight. The goods actually delivered to S for shipment consisted partly of steel and partly of general merchandise, for which the freight rates were higher than for steel. S accepted the good entirely and they were stowed on the ship. S claimed freight in excess of that agreed under the contract. Held: A new contract could be implied from the facts, and the higher freight could be claimed as a reasonable remuneration, i.e. on a quantum meruit.22 For such a contract to arise, each party must have had the option of accepting or rejecting the substituted agreement.23 A new and different contract cannot be forced by one party on the other against his will. In other case it was held that no new contract can be implied, the plaintiff cannot succeed in a claim on a quantum meruit.24 If the party not in default has no option but to accept substituted agreement, then he will not be liable to a quantum meruit or any other action.25 Indian Courts have also focused on the interrelationship of inference of a new contract and claim based on quantum meruit. Indian Court held that no claim in the nature of a quantum meruit can be founded upon non-performance of a contract, unless the benefit arising from its partial or defective performance is accepted by a person who has the right to insist on its performance, or the circumstances are such as to show, in some other way, that a new contract has arisen between the parties. But it is also necessary that the circumstances giving rise to the inference of a new contract must give an option to the defendant to take or not to take the benefit. Where a contract has been partly performed, the mere fact that the part performance has been beneficial is not sufficient to make the party who has been benefited, liable to pay for it, as there is necessity of establishing the fact that he has taken the benefit of the partly performed contract under such circumstances which are enough to raise an implied promise to pay for the work done, notwithstanding the non-performance of the remaining contract.26 Courts in Pakistan recognise the principle of law that when the circumstances and facts of the case and conduct of the parties to an express contract leads to the inference that they have agreed to substitute for it a new contract taking the place of their original contract, an action on a quantum meruit is available to a party who has performed his obligations under the fresh implied contract which is in consonance with the law. Where contract was for construction of eight-storeyed building but sanction being for four stories, construction beyond sanctioned limit was not permissible and if undertaken was to violate provision of law. Part of work performed by plaintiff was proved. Plaintiff although was not entitled to receive from defendants reimbursements of the entire amount as claimed, yet defendants were liable to pay jointly and severally, to plaintiff specified amount for work done by it, which was decreed with interest as worked out by Court from the date of suit till payment.27

Express or implied contract

Where one person has rendered a service to another in circumstances which indicate an understanding between them that it is to be paid for, although no particular remuneration has been specified, the law will infer a promise to pay quantum meruit, i.e. as much as the party doing the service has deserved, or, as is generally described, a reasonable sum.28 The principle is precisely the same when goods are bought and sold without an express agreement as to the price in which case the buyer must pay a reasonable price.29 Quantum meruit is but a reasonable compensation awarded on implication of a contract to remunerate, and an express stipulation governing the relations between the parties under a contract, cannot be displaced by assuming that stipulation is not reasonable. The Contract Act does not enable a party to a contract to ignore the express covenants thereof, and to claim payment of consideration for performance of the contract at rates different from the stipulated rates, on some vague plea of equity.30 Indian Supreme Court has enunciated that compensation in quantum meruit is awarded on work done or services rendered, when the price thereof is not fixed by a contract. For work done or services rendered pursuant to the terms of a contract, compensation quantum meruit cannot be awarded where the contract provides for the consideration payable in that behalf.31 The express terms of the contract cannot be ignored and the Court cannot grant relief to the plaintiff on the basis of quantum meruit. That can only be done if the contract is frustrated. Express terms of the contract cannot be departed from so long as the parties are bound by the contract.32 If the other party does not does not object to the defective work and waives the defective execution, he is bound to compensate the contractor. Thus where a contract for electric installations between the plaintiff and the defendant provided that the plaintiff should use 3/20 wires and gave option to the defendant to rescind the contract and dismantle the installations at its discretion and the plaintiff used only 1/20 wires and, though the stipulation regarding the quality of the wire to be used was an essential condition going to the root of the contract, the defendant did not exercise the option of dismantling the installation s but proceeded to apply to the electricity department for connection and enjoyed the benefit of the defective work. It was held that though the plaintiff could not claim to recover any amount on the basis of the contract, yet the conduct of the defendant in enjoying the benefit of the work without immediately cancelling the contract and exercising the option of dismantling the work clearly showed acceptance of the work as performed and he was, therefore liable to pay for the same on quantum meruit, not on the basis of any quasi-contract. It is not possible to bring under any particular rubric, action for compensation on quantum meruit. It may be either contractual or quasi-contractual. From the mere fact that the contract is an implied in fact does not follow that the obligation is quasi contractual. It is a genuine contract, the only thing is that the contract is made out not by express words but by implication from the facts and circumstances of the particular case. In the instant case, the work done by the plaintiff, although not according to the specifications was accepted by the defendant and it enjoyed the benefit thereof. Therefore, the promise to pay has to be inferred not by any imputation of law but by implication from the facts and circumstances of the case.33 Courts in Pakistan also recognize that quantum meruit does not play its role if express agreement is there to pay for the work done or services rendered. Karachi High Court held in a case that where there is no agreement as to charges for repair, the contractor is entitled to reasonable charges on the ground of quantum meruit.34 Where there was no fixation of rates by the express contract and no basis was available on which the calculation of salvage work could have done, payment for it had to be made on quantum meruit.35

Restitutionary claims

Where the claim is in Restitution, the obligation is imposed on the parties by the law without reference to any promise or agreement. When a contract has been broken in such a way as to entitle the innocent party to treat himself as discharged, and he has elected to so, he may sue on a quantum meruit for the value of the work he has done under the contract, as an alternative to bringing an action on the contract for damages. In such a case his claim to recompense arises in Restitution.36 Indian Supreme Court has held that this remedy by way of quantum meruit is restitutionary as it is a recompense for the value of the work done by the plaintiff in order to restore him to the position which he would have been in if the contract had never been entered into.37 The plaintiff was entitled to recover quantum meruit even though he had been appointed managing director under a void contract. Court held that the obligation to pay was imposed by a rule of law and is therefore, restitutionary in nature. 38

Conditions for grant of Restitution

In order that this remedy should be available in Restitution, certain conditions must be fulfilled. First, the claim must be brought by the party not in default. The party who breaks the contract, even though he may have partially performed some part of his obligation, is not ordinarily entitled to a quantum meruit for work which he has done unless the other party who has had the option to accept and exercises that option in accepting the work.39 Secondly, a quantum meruit claim is only available if the contract has been broken by the defendant in such a way as to entitle the plaintiff, to regard himself as discharged from any further performance, and he has elected to do so. If the contract is still continuing, or is open, he cannot use the quantum meruit remedy, but must rely on his remedy in damages. The defendants had commenced a periodical publication, called The Juvenile Library and had engaged the plaintiff to write a volume on ancient armour for it. For this he was to receive the sum of 100 pounds on completion. When he had completed part, but not the whole, of his volume, the defendants abandoned the publication. Court held that when a special contract is in existence and open, the plaintiff cannot sue on a quantum meruit. This case involved the question that whether the contract did exist or not. It distinctly appeared that the work was finally abandoned; and the jury found that no new contract had been entered into. Under these circumstances and facts of the case court held that the plaintiff ought not to loose the fruit of his labour. The plaintiff was held entitled to retain a verdict for 50 pounds which the jury had awarded to him.40 Similarly in other case, defendant appointed the plaintiff his agent to advertise and sell tickets for seats to view the funeral of the Duke of Wellington, the plaintiff to receive a commission on the tickets sold. The defendant wrongfully revoked the plaintiff's authority after he had already incurred certain expenses in carrying out the contract. It was held that the plaintiff was entitled to recover quantum meruit for the expenses so incurred.41

Different assessment in quantum meruit

If the injured party chooses to sue on a quantum meruit, the law proceeds on a principle of assessment which differs from that which it applies in assessing damages in assessing damages for breach of contract. Lord Porter pointed out that the sum which the injured party is entitled to recover may differ according as it is assessed on the one or other of these two principles. If A is to be paid 1200 pounds on completion of the work, should he claim damages, he will receive, 200 pounds (less any saving on labour and materials), which is the sum he would have received had B performed the contract. But if he asks for quantum meruit, he is asking to be paid the reasonable value of the work done. Ordinarily, the damages will be the most favourable remedy, as he can then recover the profit element in the transaction. But there might be special circumstances as the contract price had been underestimated, or the costs of doing the work had risen considerably since the contract was made. In such circumstances a plaintiff might well secure a greater measure of compensation by suing on a quantum meruit instead of for damages.42 But it is arguable that this claim should be limited to a pro rata proportion of the contract price, otherwise this would alter the allocation of the financial risks undertaken by the contract.43


_______________________________

1 A.G. Guest, Anson’ Law of Contract, Twenty-Sixth edn., p.596.

2 OSBORN CONCISE LAW DICTIONARY, John Burke, Sweet & Maxwell, Sixth edn (1976)., p..273.

3 P A Read, Contract Law, 18th edn., p.327.

4 Overstone Ltd. v. Shipway,[1962] 1 W.L.R.117.

5 W T Major, Christine Taylor, Law Of Contract, Ninth edn.,p.286.

6 Puran Lal Shah v. State of U.P., AIR 1971 SC 712 at pp. 715,716.

7 Krishan Mennon v. Cochin Devasowm Board, AIR 1963 Ker.181 at p.183.

8 1986 CLC 2898.

9 Mount v. Oldham Corporation [1973] 1 QB 309.

10 Puran Lal Shah v. State of U.P., AIR 1971 SC 712 at pp. 715,716.

11 Sale of Goods Act 1979, s.49.

12 W T Major, christine Taylor, Law Of Contract, Ninth edn.,p.287.

13 Sale of Goods Act 1979, s.8.

14 Sale of Goods Act 1979, s. 49(2).

15 Workman v. Lloyds Brasileno [1908] 1 KB 968.

16 Denmark Productions v. Boscobel Productions [1969] 1 QB 699.

17 De Bernardy v. Harding (1853), 8 Exch. 822.

18 White and Carter Councils v. MacGregor [1962] AC 413.

19 Puran Lal Shah v. State of U.P., AIR 1971 SC 712 at pp. 715,716

20 19 Ind. Cas. 48 (Lah.)

21 Province of the Law of Tort, p.157; (1947), 63 L.Q.R. 35.

22 Steven v. Bromley & Son, [1919] 2 K.B. 722..

23 Forman & Co. Pty., Ltd. v. Ship ‘Liddersdale’, [1900] A.C. 190.

24 Sumpter v. Hedges, [1898] 1 Q.B. 673.

25 Munro v. Butt (1858), 8 E.& B.738.

26 Krishan Mennon v. Cochin Devasowm Board, AIR 1963 Ker.181.

27 1994 CLC 1380.

28 Hall v. Walland (1962), Cro. Jac. 618.

29 Sale of Goods Act, 1979 s. 8(2), c.54.

30 Alopi Prashad and Sons Ltd. v. Union of India, AIR 1960 SC 588 at pp. 593,594.

31 Puran Lal Shah v. State of U.P., AIR 1971 SC 712 at pp. 715,716.

32 State of Rajasthan v. Motiram, AIR 1973 Raj. 223.

33 Krishan Mennon v. Cochin Devasowm Board, AIR 1963 Ker.186.

34 PLD 1978 Kar. 1952.

35 1986 CLC 2898.

36 Jones (1970, 97 L.Q.R. 273.

37 Puran Lal Shah v. State of U.P., AIR 1971 SC 712 at pp. 715,716

38 Craven-Ellis v. Canons Ltd [1936] 2 KB 403.

39 A.G. Guest, Anson’ Law of Contract, Twenty-Sixth edn., p.598

40 Planche v. Colburn,(1831), 8 Bing. pp. 14, 16.

41 De Bernardy v. Harding,(1853), 8 Exch. 822.

42 Heyman v. Darwins,[1942] A.C. 356, at p.398.

43 Slowery v. ladder, [1904] A.C. 442.

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