Quantum Meruit

What is Quantum Meruit?

"Quantum meruit" is a Latin phrase meaning "as much as he has deserved" or "as much as he has earned." In the legal context, it refers to the principle that a person should be compensated for the value of the services or goods they have provided, even if there is no formal contract specifying the payment amount. This concept is often applied in cases where a contract is either nonexistent, unenforceable, or partially performed, ensuring that individuals or entities are not unjustly enriched at the expense of those who have provided valuable services or goods.

In layman's terms, quantum meruit simply refers to fair compensation. It is not the same as a lawsuit that can be brought for contract violations.

A person who has rendered services in a quasi-contractual relationship is entitled to quantum meruit damages at an amount deemed fair. The fair market value of the services that one party provided to the other may also be used to this sum. Although courts maintain discretion in determining equitable remedies, quantum meruit is frequently computed using the market value of the services.

Legal Provisions relating to Quantum Meruit

The Indian Contract Act, 1872, establishes the principle of quantum meruit, ensuring fair compensation for benefits conferred without gratuitous intent, and addressing situations of contract breaches and invalid agreements. This principle is encapsulated in Sections 70, 73, and 65 of the Act. Section 70 mandates compensation for benefits received from non-gratuitous acts, while Section 73 ensures fair recompense for services in the event of contract breaches. Section 65 deals with the restitution of benefits gained under invalid agreements. Together, these provisions uphold equitable relief and prevent unjust enrichment, promoting fairness in commercial transactions.

Section 70

Section 70 of the Indian Contract Act, 1872, addresses situations where an individual gains something from non-gratuitous conduct. It establishes the obligation that when a person lawfully provides assistance or delivers something to another without intending it as a gift, and the recipient benefits from it, the recipient must compensate the provider. The purpose of this section is to ensure that the provider of goods or services receives fair compensation, thereby preventing unjust enrichment and promoting fairness in transactions. This provision underscores the principle that benefits received from non-gratuitous acts should not go unrewarded, safeguarding the interests of those who offer valuable services or goods without the intention of giving a gift.

Section 73

Section 73 of the Indian Contract Act, 1872, deals with damages or losses resulting from contract breaches. It establishes that in cases of a contract breach, the aggrieved party can claim fair compensation for services rendered, ensuring that the party who performed their contractual obligations receives due payment. The purpose of this section is to support the principle of quantum meruit by guaranteeing equitable relief and preventing unjust enrichment. By providing a mechanism for claiming compensation, Section 73 ensures that individuals and entities are fairly compensated for their efforts and contributions, maintaining fairness and balance in contractual relationships.

Section 65

Section 65 of the Indian Contract Act, 1872, pertains to situations where an agreement is discovered to be void or becomes void. It imposes an obligation on anyone who has gained a benefit from such an agreement to return the benefit or compensate the recipient. The purpose of this section is to reinforce quantum meruit claims in cases of invalid agreements by ensuring that beneficiaries of such agreements are obligated to reimburse the other party. This provision prevents undue enrichment and promotes fairness in commercial transactions by ensuring that no party unfairly benefits from an agreement that is not legally enforceable.

Case Laws

1) Kamlesh Ahuja vs State Of Hry. And Ors

Based on its own ruling in Pritam Singh Dhaliwal v. State of Punjab and Anr. (2004), the Punjab-Haryana High Court concluded that an employee under a higher pay grade must get benefits commensurate with that pay grade in this instance. Consequently, in the event that an employer fails to pay their employee, a lawsuit based on quantum meruit may be filed to get the entire amount owed. Thus, it's clear that there are several ways in which the quantum mechanical concept might be applied to alleviate pain.

2) MTNL Case( Mahanagar Telephone Nigam Limited v. Tata Communications) - 2019

The MTNL case, Mahanagar Telephone Nigam Limited v. Tata Communications, is a 2019 case that is somewhat recent. The Honourable Supreme Court ruled in this instance that the existence of a contract precludes the raising of a quantum meruit claim. According to section 74 of the Indian Contract Act, only the amount indicated in a contract for liquidated damages is to be assessed upon violation. Any amount collected beyond this predetermined threshold must be reimbursed.

3) Mann v. Paterson Constructions Pty Ltd

An Australian court heard this case. The High Court of Australia ruled in this case that the amount specified in the contract limits the maximum amount of compensation that a party that has been wronged may seek. This decision caused controversy in the legal community since, with the exception of Australia and India, most other countries allow a quantum meruit claim to exceed the amount agreed to in the contract. Therefore, we can say that, notwithstanding their differences, Indian and Australian courts concur when it comes to restricting a quantum meruit claim based on the contract.

Slight variations and nuances in the concept

Quantum meruit and Unjust enrichment

There are a few key concepts related to quantum meruit and unjust enrichment to grasp. Quasi-contracts are one type of mechanism intended to avoid unjust enrichment, which is the phrase used to describe when one party unfairly gains from the activities of another. The theory of quantum meruit offers a way to pursue compensation for the advantages received and is the remedy for unjust enrichment. The applicability of quantum meruit is more comprehensive and can encompass circumstances involving express contracts in which unjust enrichment may not be a contributing element. A quantum meruit claim may still be relevant in certain circumstances, guaranteeing that parties get just compensation for their contributions and labor.

Quantum meruit as a Quasi-Contract (when there is no legally enforceable contract)

A quasi contract is nothing more than an instance in which the circumstances imply the existence of a contract, even if there isn't a formal one. Therefore, a party bound by quasi-contracts is required to attend to the demands of the other party. For this reason, implied contracts are another name for quasi-contracts.

Therefore, a quantum meruit claim is a type of quasi-contract. Consequently, the harmed party may bring a lawsuit upon quantum meruit based on an implied term in the agreement even in the absence of a formal written contract between the two parties. To elucidate this idea further, we have case law.

Quantum Meruit in UK, USA & Singapore Laws

UK Laws

Quantum meruit claims can occur in a variety of situations in the UK. When services are provided with the expectation of payment but there is no legal contract in place, this is known as an implied contract. A contract that is terminated or not fully executed provides an additional context in which payment for the work accomplished up to that point might be made. In cases of unjust enrichment, quantum meruit claims may also be made to stop one party from unfairly benefiting at the expense of another. Furthermore, by assuming clauses in contracts for the sale of services that guarantee fair remuneration for services rendered, the sale of Goods and Services Act 1982 supports quantum meruit claims.

USA Laws

In the United States, quantum meruit is frequently used in situations involving many distinct circumstances and is a component of the more general idea of unjust enrichment. Implied contracts are one example of this, when a contract is implied by law based on the actions of the parties. Partially executed contracts are another frequent scenario in which the value of goods or services supplied prior to contract termination might be recovered. Restitution also depends on quantum meruit, which is a component of equitable remedies that prevents one party from unfairly benefiting at the expense of another. Guidelines for quantum meruit claims are provided by The Restatement (Second) of Contracts, which highlights the need of just recompense for supplied services.

Singapore Law

Similar to the UK, Singaporean law upholds common law concepts of quantum meruit, guaranteeing just recompense for services rendered even in the absence of a written contract or in cases where a contract has been partially fulfilled. In order to secure fair results and avoid unfair enrichment, the courts in Singapore have upheld petitions for quantum meruit.

Difference b/w UK and Australian positions on Quantum Meruit

The UK position on repudiation of contract, restitution, and quantum meruit has evolved, especially in light of the High Court's decision in Mann v. Paterson. Historically, UK and Australian laws on restitution seemed divergent, but recent developments suggest a convergence. The UK courts recognize restitutionary remedies in the context of contractual repudiation and quantum meruit claims, as demonstrated in Mann v. Paterson. The case highlighted that a contractor has no accrued right to payment unless specified in the contract, and the Housing Grants, Construction, and Regeneration Act 1996 (HGCRA) mandates interim payments in construction contracts. When a contract is repudiated, accrued rights to payment must be respected, and a quantum meruit claim cannot be made for these rights. However, if there are no accrued rights, restitution for the value of the work done is possible. This principle, rooted in the failure of basis doctrine, is now acknowledged in UK law, allowing for claims when the promised performance is not received. The UK courts' acceptance of severable consideration in contracts further aligns with the Australian approach, suggesting that, under specific conditions, the UK's restitutionary remedies may parallel those in Australia.