It seems only fair that a party should be paid a reasonable amount for the work it performed. But the courts have taken a nuanced approach to quantum meruit claims
Anyone dealing with construction disputes will be familiar with claims based on “quantum meruit”. This means roughly “a reasonable amount for work performed”. The claim is usually made when there is no contract – for example, because the parties were unable to agree key terms. It can also arise where there is a contract, but no agreement on price.
If such a claim is made out, how does the court then assess the amount due? A recent talk to assorted construction lawyers called “Quantum meruit: right or remedy?” organised by TECBAR, the construction barristers’ association, contained useful guidance. The talk was given by Professor Graham Virgo of Cambridge University. It covered some areas that are of interest for lawyers only. However, the clear summary of where the law is at the moment was helpful for anyone in the construction industry dealing with this type of claim.
As a typical construction-related example (not one of Virgo’s), suppose that a contractor enters into a two-stage tender arrangement, by which it is to work up an employer’s outline design, price the works packages, prepare invitations to tender and then assess the tenders. Assume that the employer is impatient, so that the parties never agree the scope of the services or the sum that the contractor is to be paid. When the tenders are back, the employer is unhappy about the prices. He accuses the contractor of overengineering and of ignoring his need to cut costs. So he ends the contractor’s involvement and later proceeds with a much cheaper version of the scheme – and a different contractor.
In this scenario, the contractor undoubtedly has a claim for services performed. But how is the value of those services assessed? Should one look at the cost to the contractor of providing the services, or the benefit to the employer of receiving them – or a bit of both?
Can the amount of the benefit be reduced to take into account the fact that the particular employer values the services at less than their market value? Yes, said the court
As Virgo explained, claims for quantum meruit are based nowadays on the principle of unjust enrichment. Applying this to the above scenario, the employer has been “enriched” by, or has benefitted from, the services carried out for him, and it would be unjust for him to retain the benefit without paying. Quantum meruit is merely the remedy, not the right or cause of action in itself.
The leading case is now Benedetti vs Sawiris (2013) a decision of the Supreme Court. Here, the claimant, Benedetti, provided services for an employer by way of searching for suitable co-investors in an Italian telecommunications company that was being sold. The original agreement between the parties was abandoned when the co-investors lost interest, but the employer decided to go it alone and eventually acquired the company. The question then arose as to what he should pay the claimant for his work.
The court said that unjust enrichment is primarily about assessing the amount by which the benefitting party has been enriched, not the costs incurred by the party performing the services (though such costs could be relevant in quantum meruit claims where there is a contract, but no agreement about price). The starting point was the objective market value of the services. So in the scenario above, the cost to the contractor might be some evidence of market value, but nothing more.
Claims are often prepared with the contractor simply printing off a schedule of his costs and expecting payment. That now looks wrong
Can the amount of the benefit then be reduced to take into account the fact that the particular employer values the services at less than their market value? Yes, said the court.
As a judge put it in Benedetti: “I see no reason why a court should not take into account a defendant’s subjective opinion of the value of the claimant’s services in order to reduce the value of them to him, provided of course that the court is satisfied that it is his genuine opinion.” So, returning to the two-stage tender example, the employer might be able to prove that he would not have chosen to pay for some of the over-engineered services, had the parties discussed them at the outset.
Quantum meruit is sometimes the only way for a contractor to get paid. Yet claims are often prepared making no reference to unjust enrichment, and with the contractor simply printing off a schedule of his costs and expecting payment. That now looks wrong. Market value, with potential “devaluation” to account for the actual position of the particular employer, appears to be the more correct legal approach.
Ian Yule is a partner in Weightmans