enrichment
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This article is written by Kashish Kundlani, from Ramaiah Institute of Legal Studies, Bangalore. In this article, she discusses the principle of quantum meruit.

Introduction

When parties enter into a contract there is a possibility for the breach of the contract and breach of a contract can happen due to many reasons. For any breach of a contract to happen, it is necessary that the remedies should also be made or should be given by any Court. Out of five remedies which are available to the aggrieved party, one is a suit upon quantum meruit.

Applying this remedy in a suit requires a thorough understanding and essence of quantum meruit. Also, one should be aware of the usage of quantum meruit as to when and where can this be applied or when it can be used by the aggrieved party.  

Meaning of Quantum meruit

Quantum meruit is a Latin phrase and is related to the Indian Contract Act, 1872.

It means “what one has earned” or “as much as he has earned”. In simpler terms, it refers to the actual value of the services rendered or performed. 

Even if there is no specific contract this law implies a promise to pay a reasonable amount for the labour and material furnished.

The Black Law Dictionary states that quantum meruit means “as much as one deserves”.

Theory of quantum meruit

Quantum meruit involves cases where someone gets a benefit while the other party gets nothing. In contracts, this refers to the benefit or enrichment which one party receives as a result of the other party’s actions.

In other words, it means that the other party who has received the services is unjustly benefited and must return it to the party who provided such benefit.

For example, ‘S’ is the daughter and ‘M’ is the father. They entered into an agreement where ‘M’ asked ‘S’ to provide medical care for him while he was sick. In return, ‘M’ agreed not to write a will and agreed to give his estate to ‘S’ after he dies with an intent to give her a fair portion for the services rendered. However, ‘M’ soon died, leaving all of the estates for his brother and nothing for ‘S’. Here ‘M’ was unjustly enriched as he received the services but in return ‘S’ received nothing.

In this example, ‘S’ seeks to recover a portion of “M’s” estate by claiming the remedy of quantum meruit. This principle is based upon the idea that recovery should be granted to one party where they have not received the value for the services they rendered or when another party was unfairly and unjustly enriched.

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Suit upon quantum meruit

Quantum meruit is a claim under quasi-contract. The remedy to a party in a breach of contract is the suit upon quantum meruit. The suit upon quantum meruit arises where a part of a contract is performed by one party and then there is a breach of contract or it is discovered that the contract is void or becomes void.

The aggrieved party may file a suit upon quantum meruit and may claim payment in proportion to work done or goods supplied in the following cases:- 

  • Where work has been done by one party in the execution of a contract but the other party refuses to perform his part. Or prevents the person to perform the contract.

For example, Seema was the owner of a music publishing house and she engaged in a contract with Veer to compose a music series which will be published by the music publishing house. The first music album was released but before the publication of the second music album the music publication house was closed. Here Veer can claim quantum meruit for the part already published. He is entitled to a claim because he was somehow prevented by the other party to perform his part and the other party has violated the terms of the contract by not paying him the amount he deserves. 

  • Section 65 of the Indian Contract Act, 1872 talks about the circumstance that where work has been done in the execution of the contract but later it is discovered that the contract is void or it becomes void.
  • Where a person enjoys the benefit of a non-gratuitous act (given or received without payment but where the party was obliged to pay) despite the fact that there is no express agreement between the parties, then the person who has enjoyed the benefit has to compensate the other party or restore the thing so delivered.

For example, ‘D’ a vendor leaves his goods at “J’s” shop by mistake and ‘J’ treats them as his own goods without paying anything. Here ‘J’  is bound to pay ‘D’ for the goods he left.

  • When the contract is implied or expressed to render services but there is no agreement with regard to remuneration – In such a case, a reasonable remuneration is payable and what is a reasonable remuneration will be determined by the Court and this reasonable remuneration is the quantum meruit. This concept is explained under Section 70 of the Indian Contract Act,1872.
  • Where the contract is divisible, and a party to the contract has done its part, he may sue other parties who have not performed for quantum meruit.

This rule even applies to a person who is claiming quantum meruit and himself is guilty of the breach of the contract, but the following two conditions should be fulfilled for that:-

  • The contract must be divisible
  • The other party must have enjoyed the benefit of the part which has been performed, although he had the option of declining it.

For example, Chena agreed to construct a house for David for ₹10,00,000 but in midway, she abandoned the contract after having done the work worth ₹4,00,000. Afterwards, David somehow got the work completed. Here, Chena could not recover anything for the work she has done, as she was entitled to the payment only on completion of the work which apparently she could not do.

Where the contract is indivisible and performed in a bad way- the party at default can claim a lump sum amount and can reduce the amount for the bad work done if the following conditions are fulfilled:-

  • The contract should be indivisible,
  • The contract should be for a lump sum,
  • The contract should be completely performed and,
  • The contract was performed badly.

For example, Raju agreed to construct a house for Pinku for a lump sum of ₹5,00,000. Raju did complete the work but Pinku complained of fault in the work done by him. It cost Pinku another ₹1,00,000 as a remedy to the defect. In this example, Raju could only recover ₹4,00,000 from Pinku by reducing the amount of bad work done.

Quantum Meruit vs. Unjust Enrichment

It is very common for people to get confused between the two concepts. Both the concepts discuss the aim of preventing one party to perform the contract and the person preventing the other takes advantage of the services received without even paying for their values.

The difference between the two concepts is that the unjust enrichment deals with issues where there is a failure to pay for the services and quantum meruit deals with such issues where the fair or reasonable amount should be paid.

To be successful in a suit upon quantum meruit, the service provider i.e. plaintiff must prove that the receiver of the services i.e. defendant agreed to the provided services, knowing that he has to pay the plaintiff for the services provided and that the defendant was unjustly enriched, which means he received something for nothing. In simpler terms, it means that he received for the services but did not pay in return, which was not the agreement. 

The amount given in a suit upon quantum meruit, especially where there is no written contract specifying an amount, is generally based on the fair market value for the services rendered. 

Case laws

Planche vs Colburn [1831] EWHC KB J56

In this case, the plaintiff entered into an agreement to write a book for the defendant.

On completion of the work, 100 pounds was agreed to be paid. The plaintiff started writing the book and completed a large portion of it. Afterwards, the defendant decided not to proceed with the work and refused to pay money to the plaintiff, even though the plaintiff was ready and willing to perform the work.

It was held that the plaintiff is entitled to claim the money as the defendant has refused to perform his part of the contract.

Craven-Ellis v. Cannons Ltd [1936] 3 All ER 1066

In this case, Craven Ellis was appointed as the managing director of a company under an agreement in which his remuneration was fixed. But it was found that the contract is void because neither Crave Ellis nor the directors seem to execute the contract as they did not obtain the qualification shares (a share of common stock that a candidate for a company’s Board of Directions (BOD) is required to own) within two months after the appointment which was required as per the Articles of Association.

The plaintiff continued to render the services even though the contract was void. His suit upon quantum meruit is a valid one as the contract being void does not disentitle him to claim for his services rendered. Since the company had accepted the benefits of services rendered by Craven Ellis knowing that the services were not intended to be gratuitous, it was held that Craven Ellis, for his services rendered, is entitled to receive reasonable remuneration.

Sumpter v. Hedges [1898] 1 QB 673

Facts of the case

The plaintiff was a builder. He entered into a contract to build two houses and stables on the defendant’s land for approx £560. While the buildings were still in an unfinished state he informed the defendant that he is having no money. Hence, he refused to work and only approx £300 work was completed. The plaintiff asked for the money of half of the work done from the defendant. The defendant refused and the plaintiff filed a case.

Judgement

It was held that the defendant had no choice apart from accepting the building like this and he couldn’t keep the building like this forever so he completed the work. In this case, the contract stated that the money had to be paid in lump sum after the completion of the work and so the plaintiff could not be granted the payment after only doing part of the work. And also as there was no fresh contract so the plaintiff cannot recover on the basis of quantum meruit.

The relevance of this case was that a person can only recover a part of his work when the contract is not a lump sum and the owner freely accepts the work.

Here it was not free, instead, he did not have any choice. 

Hoenig v. Isaacs [1952] 2 All ER 176

Facts of the case

The plaintiff is an interior decorator who entered into a contract with the defendant to perform the decorative and furnishing work. A lump sum of £750 was to be paid for the work.

On completion of the work, the outstanding balance was £350 for the contractor’s work and labour. The defendant refused to pay the balance amount on the grounds that there were certain defects regarding the wardrobe and bookshelf and the cost for the defects was £56. The plaintiff brought a suit for the refusal.

Judgement

The Court held that the plaintiff has completed most of the work which was agreed between the two and was therefore entitled to the remuneration which was agreed in between them by reducing the price of the defects.

Conclusion 

After a proper analysis of the remedy of quantum meruit, it is clear that the law requires it to be fair and reasonable. The theory supports equality of the parties and helps to ensure that if a person provides a service or a good, then he should receive the benefit of the contract and in corollary, if that person receives nothing, then that person can avail the remedy by filing a suit upon quantum meruit.

References


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