As much as you deserve

Dennis Brand from Traprain Consultants explores the meaning of the Latin phrase ‘Quantum Meruit'.

In the construction and engineering industries, the expression ‘Quantum Meruit’ is more commonly interpreted as ‘the amount a party deserves’ or ‘what the job is worth’. A claim for Quantum Meruit is a claim for payment for work carried out or services provided where the price has not been quantified; it is usually a claim for a reasonable sum.

A claim for Quantum Meruit may be based on what is termed ‘in contract’ or ‘in restitution’, although more frequently the term Quantum Meruit is used to mean a claim in restitution only. Where there is a claim for Quantum Meruit in contract, it is based on the agreement of the parties. It arises in one of two situations:

a) Where the contract is silent on the method of remuneration for the work performed or services provided; in such a situation in construction, contract terms of payment of a reasonable remuneration will be implied by statute; or
b) Where the contract contains an express agreement to pay reasonable remuneration or similar terminology.

The above Quantum Meruit claims are claims in contract. In the first, the issue is whether or not there is a contract which applies to the situation. If so, the main issue is then the measure of the reimbursement. In the second, the main issue will be the interpretation of a particular term of the contract. However, a claim for Quantum Meruit will not succeed if the contract deals with the situation.

A claim for Quantum Meruit in restitution seeks to impose a right to payment by law arising from the circumstances which amount to unjust enrichment by one party at the expense of another. This type of claim is sometimes referred to as a claim arising in quasi-contract. The first issue in a claim for Quantum Meruit in restitution is whether or not there is any entitlement in law; if so, then the second issue is how the reimbursement is to be measured.

A claim for Quantum Meruit in restitution can arise in the following situations:

a) Where the parties proceed in the mistaken belief that there is a valid and enforceable contract, but it is subsequently proved that there is no contract;
b) One party requests services from the other which are not governed by a contract and fall outside the scope of any variation provision;
c) Where the contract is frustrated; or
d) Where before completion the contractor accepts a repudiation by the employer as terminating the contract. The contractor can, as a result of the employer’s action, elect to claim damages for breach of contract or compensation by way of Quantum Meruit in restitution for the work performed.

A claim for Quantum Meruit presupposes that no contract exists in respect of the work performed or service provided, or if a contract does exist there is no agreed price which covers a particular element of the work. However, in such cases the law implies a promise from the employer to the contractor that it will pay it for such work that has been performed on the basis of ‘the amount a party deserves’ or ‘what the job is worth’.

UAE Federal Law No.5 of 1985 – The Civil Transactions Law (‘The Civil Code’) provides for payment for work on a Quantum Meruit basis. Article 888 states: ‘‘If the consideration for the work is not specified in a contract, the contractor shall be entitled to fair remuneration, together with the value of the materials he has provided as required by the work.’’

You will note that Article 888 goes further than just remunerating the contractor for ‘the amount a party deserves’ or ‘what the job is worth’, but provides also that the contractor receive the value of the materials he has provided. According to Article 889:

(1) ‘‘If the architect who has planned the building and supervised the performance thereof has not agreed upon a fee, he shall be entitled to fair remuneration in accordance with custom.
(2) If any unforeseen event occurs which prevents the completion of the performance of the work in accordance with the plan prepared, he shall be entitled to fair remuneration for what he has done.’’

Article 889(1) allows the assessment of the architect’s (designer’s) services, where no fee has been agreed, to be made in accordance with custom; an example of this being where the cost of design and/or supervision is an estimated sum based on a percentage of the forecast cost of construction.

Article 889(2) is particularly interesting because, with many projects having been suspended or cancelled as a result of the global economic downturn (i.e. an unforeseen event), which prevents the completion of the work in accordance with the plan (e.g. contract programme), a contractor is entitled to fair remuneration (i.e. payment) for the work he has done even where the contract price is a lump sum or fixed price for all the work. This, of course, means that ‘fair remuneration’ is not just what the contractor considers fair but what is fair after taking into account any defective work and the cost of putting it right.

Often a claim for Quantum Meruit arises out of the issue of a letter of intent where there is an urgency to commence the works. The issue in those cases is whether or not there is a contract and, if so, the meaning of the terms of payment.

To establish a contract not only requires agreement by the parties on all the terms they consider essential, but also sufficient certainty in their dealings to satisfy the requirement of completeness. Of paramount importance, however, is to show a clear intention to create a legally binding relationship.

Dennis.Brand@traprain.com