Dealing with Quantum Meruit Claims in Nutshell

Quantum meruit is a Latin phrase meaning "as much as deserved". In the context of contract law, it means something along the lines of "reasonable value of services". In the United States, the elements of quantum meruit are determined by state common law. For example, to state a claim for unjust enrichment in New York, a plaintiff must allege that (1) defendant was enriched; (2) the enrichment was at plaintiff's expense; and (3) the circumstances were such that equity and good conscience require defendants to make restitution.

For example, when a person hires another to do work for him, and the contract is either not completed or is otherwise rendered un-performable the person performing may sue for the value of the improvements made or the services rendered to the defendant. The law implies a promise from the employer to the workman that he will pay him for his services, as much as he may deserve or merit. In calculating a quantum meruit award, the values set forth in the contract are rebuttable, meaning the one who ultimately may have to pay the award can contest the value of services set in the contract.

Another example is that a person talks to a neighbor and tells him he's going to build a wall on their property that will give a benefit to both the person and his neighbor, the person implies that it would be cheaper for both of them if the Man perform the labor instead of hiring a professional. The neighbor agrees that the wall should be built, but no price is negotiated. The person builds the wall, and then asks the neighbor to compensate him for the benefit of the wall that he conferred on the neighbor (usually half the value of the wall). The neighbor refuses. The man is entitled to some compensation based on quantum meruit. This is because there was an implied promise between the man and the neighbor, which is derived from contract law, because the man was acting under the assumption that the neighbor would pay for part of his services. 'Quantum meruit' may therefore depend on equitable principle of unjust enrichment which is based on the need to prevent the neighbor from unjustly enriching himself by allowing the fence builder to proceed with the work based on an assumption that he would be compensated.

Another example is when a contractor is contracted to work on a school. The contractor does some work but then quits (breach of contract). The contractor is entitled to be paid for the services he has already done for the school on the basis of quantum meruit (however the school may be entitled to damages arising out of the need to look for a new contractor).

Unlike in a claim for loss and expense where the task is to put the innocent party in the same position it would have financially been in had it completed the whole job under the contract. For a quantum meruit claim, the approach is to assess the fair and reasonable value of the work performed. This involves a determination of the value of the benefit conferred on the receiving party. This means the amount recoverable on a quantum meruit claim may potentially exceed the amount that would have been recovered if the contract had been fully performed.

It is immaterial that a judgment on a quantum meruit basis might exceed the amount which would have been payable under the contract. A quantum meruit remedy rests on the fiction that the contract ceased to exist from the beginning. As a result where the claim is made on a quantum meruit basis, the contract price does not impose a ceiling on the amount recoverable.

The contract price may provide a guide to the reasonableness of the remuneration claimed, but is not "the best evidence" of the value of the benefit conferred. A contract price is struck prospectively, based on the parties' expectation of the future course of events. A quantum meruit is assessed with the benefit of hindsight, on the basis of the events which actually happened.

Another example is where a certain portion of loss suffered by the contractor is borne by the employer particularly when a part of the contract works has been taken over by another contractor (as a remedy in catching up the delays) on the basis of payment at a higher price quoted subsequently and when the contractor has taken on board the risk of financial losses likely to incur due to price increase over a period for which he has consented to pay the cost difference.

In establishing a quantum meruit claim, the claimant must prove the total costs incurred and payments made by it in carrying out the works. The claimant must also establish that the amounts in question were fair and reasonable in the circumstances. The value of the work done can be proved by evidence of the actual costs incurred.

It is appropriate to ascertain what it would have cost to have the works carried out by another builder in comparable circumstances. This includes the entitlement to a profit margin. The inclusion of a margin for profit and overhead means that the calculation approximates the replacement cost of the works, the benefit conferred on the owner.