What Is Quantum Meruit

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Quantum meruit literally means ‘what the job is worth’. Where an owner has received a benefit from the contractor in unfair circumstances, or in other words has been unjustly enriched, equity in the form of quantum meruit, will intervene so that a contractor can claim a fair and reasonable sum for work performed and materials supplied.

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When can a claim on a quantum meruit arise?

A quantum meruit claim may arise in various circumstances, including where:

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work has been performed on the basis that a contract will be agreed, but where no contract is entered into;
a contract to perform work exists between parties, but a contract price is not specified;
a contractor performs work outside the scope of a contract, at the owner’s request and where the work is not captured by the contractual right to order variations;
a contractor performs work under a mistake and the owner knowingly accepts the work;
a contractor performs work under a contract that is void, unenforceable or terminated, including where a contract is terminated due to repudiation by an owner; and
Termination due to an owner’s repudiation.

Where a contract is terminated due to an owner’s repudiation, both parties are discharged from further performance of the contract. This is problematic for a contractor if a contractual right to payment has not yet accrued for works performed by the contractor before and up until termination. This is known as a total failure of consideration, and is the basis for a contractor’s claim in quantum meruit.

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This can occur in the following scenarios:

Entire Contract – Where a contract consists of one whole obligation to perform works, a contractual right to payment will only arise upon completion of all of the works. If termination occurs before completion, there will be a total failure of consideration of the entire contract.
Divisible Contract – Where a contract comprises of divisible obligations, a contractor’s right to payment will arise upon completion of each of the divisible portions. Where repudiation occurs before completion of a divisible portion, there will be a total failure of a severable part of the consideration, given that this will result in incomplete works, in respect of that divisible portion.

In both of the above circumstances, the failure of consideration results in the contractor not being able to receive payment for the value of the works performed. This is because, upon termination, further obligations (including the obligation to pay) under the contract are discharged before the contractor’s right to payment for the work performed arises. Practically speaking, the owner receives value without being required to attend to payment in return, and is ‘unjustly enriched’. Accordingly, restitution in the form of quantum meruit is available for the contractor to claim.

Where a contract is terminated due to an owner’s repudiation, rights and obligations which have accrued under the contract up until the date of termination are unaffected. Where works are completed before termination (either wholly under an entire contract or in respect of a divisible portion under a divisible contract) a contractual right to payment will have accrued before termination given that it would have been triggered on completion. In these circumstances, quantum meruit is not available. A contractor’s remedy following termination is restricted to a claim in debt for the amount due that has accrued, or damages for breach of contract

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