Quantum Meruit

Written by: Surbhi Modak

Introduction:

Situation 1

Sanjay is a salesman. One day he has to deliver goods to an address very far and it was already dark. Sanjay searches for the address. He finds the place and matches the address roughly with the bill address. With that match he delivers goods and leaves. The place is Sameer’ s home. He receives the goods. He had ordered similar product. But while using he realized they are different from what he ordered. Nevertheless, he uses them. Samar is waiting for his goods to arrive but its 2 days and no delivery yet. On contacting the delivery man, he was told that delivery cleared 2 days back. He claims for his goods. The company contacted Sameer. He informed them about using the goods. Company tells Sameer to pay for the goods.

Situation 2

Akhil and Neeraj are neighbors. Their common wall needs repair. Akhil said he will repair the wall. He buys the raw material and does the labour work himself. The he asks Neeraj to pay for the material and some amount for labour work.

In the both the situations above there is no formal contract between the parties but they are bind by a contract like situation. And one has to pay some amount for either goods or services rendered to the other is what is termed as doctrine of quantum meruit “

Meaning

Quantum meruit[1] is a Latin phrase in context to the Indian Contract Act, 1872. When it is said that “what one has earned” and “as much as he has earned”. When a person does some efforts in a situation which is similar to a contact but not a contact. Since there is no specific contract this law implies a promise to pay a reasonable amount for the labour and material furnished.

When a one party performs some work as per contract, and the other party repudiates the contract, or some event makes the performance of the contract impossible, then the party who has performed the work can claim for the work done. We can say where one has partly performed the contract, and the other party has terminated it or he could not perform due earned” and to impossibility or illegality, which makes it void contract. In such situation the person who has performed the contract partially can sue the other party and claim remuneration for the work done.

Section 65[2] throws light on the concept as -Obligation of person who has received advantage under void agreement, or contract that becomes void -

When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore, it, or to make compensation for it, to the person from whom he received it.

Section 70[3] of Indian contract act 1872 lays down the doctrine that - Obligation of person enjoying benefit of non-gratuitous act -Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such another person enjoys the benefit thereof, the letter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.

Conditions:

The plaintiff can institute an action for Quantum meruit if the following conditions are satisfied- 1) when the contract is discharged. 2) The claim must be brought by the party is not in default.

Grounds of claim:

Parties can claim for quantum meruit when[4]-

In a contract

Void agreements or contract that becomes void -A situation in which an agreement is void ab initio (i.e., from the very beginning) or the contract becomes void at a later time, the benefit received by either party shall have to be returned to the other party.

Some act which prevents the fulfillment of the contact

If one party is prevented from completing his contractual responsibilities under the contract due to some act or fault of the other party. So, the party at fault needs to compensate the performer party for the work done till now.

For instance, A asked B to write 10 songs for his concert and promised to pay him a certain amount per song (after all of the songs had been delivered to the party). But, after 3 had been performed, A’s programme had to be cancelled. In this case A will have to pay B for the 3 performed songs or he can be dragged to court in a suit upon quantum meruit.

Another point worth mentioning is that in the above example, let’s say B had started working on the 4th and had spent his valuable time and research on the article. In such a case, he can claim money for it as well if he can prove it in court.

Furthermore, it is applicable when there is a divisible contract else when there is an indivisible contract which is performed completely but badly then quantum meruit cannot be claimed.

When one party abandon or refuses to perform the contract then the aggrieved party can claim quantum meruit due to non-performance of contractual act. The loss can be recovered the amount is per court based on market value of the service or goods.

Non-gratuitous act

The term ‘non-gratuitous’ is something which is done with expecting something, and at least not intentionally. Let’s take the situation 1 we have mentioned above which is a classic example. In such a case, Samar needs to compensate Sameer for misusing the goods. Otherwise, Sameer can file a suit upon quantum meruit against him.

Quasi Contract

In the situation 2 we find there is a commitment to perform certain act which the parties agree. One party has compensated in case the other performs the act as per their agreement.

When there is a contract in the form of express or implied contract to deliver services in the absence of agreement for payment. In such a case, justifiable amount is payable. This amount is measured by the Court; is what is quantum meruit.

Unjust enrichment - In situations where there is no expressed contract parties claim for damages based on loss or the measure of benefit out of the services rendered. A difference in the amount can be seen based on the doctrine to consider fitting in the facts of the case. On the contrary in quantum meruit, by contrast, benefits realized and retained by the defendant do not determine damages, in fact are based on the value of the services provided by the plaintiff.”

Cases

Various cases based on quantum maruit are as below-

1) J.C Budhraja v. Chairman, Orissa Mining Corporation Ltd. And Another [(2008) 2 SCC 444][5]

An appeal was filed against High court of Orissa in the SUPREME COURT OF INDIA judgement date as18 JAN, 2008 claim was made on the basis of damages/quantum meruit.

The arbitrator had awarded an amount of Rs 52,56,847.36 for the 18 items which were basis of the claim against the amount of 70,56,573.55 Rs. for the same. Also, a total amount of Rs 3,41,42,040.00 which was with interest on delayed payments. In the claim statement filed before the arbitrator, the nature and quantum of claim made were the amount as per scheduled items of the work done as per contract assigned and the rest items were as not part of the contract schedule. Example related to cost of material and labour rate escalated due to delay in in execution.

The apex court allowed the appeals in part while set aside the judgement of the High court. The court directed a decree which was of amount 13,93,373.5 with interest rate of 12% initially years and then 6% per annum till date of payment.

2) Gujarat Housing Board, Ahmedabad vs Harilal Jethalal [6][AIR 2001 Guj 259]

The Gujarat Housing Board chose for an appeal against the judgement of the order on 27th October in the year 1988, which directed the appellant for costs and interest at the rate of 12% per annum on the amount from the date of the suit till realization.

The appellant was a registered partnership firm which was into the building construction business. The firm had submitted a tender for the construction of a building for the Employees' State Insurance Corporation, at Ahmedabad. The appellant original had accepted the tender and issued a work order and fix the date of commencement of work. There was delay in issuing the work order due to the fact of

a) non approval by the Ahmedabad Municipal Corporation,

b) non-granting the commencement certificate till that date,

c)the Board's inability to supply drawings of R.C.C. Pillars in time.

d)nearly eight months' delay in supplying the drawings as per the plaint,

While the work was being carried out and the appellate submitted an application to the Executive Engineer and to the Housing Commissioner contending increase in the rates of materials and labour, and as a result of the delay, on the part of the officials of the Board led a loss to them. But the firm completed the contract and as contemplated by agreement, had submitted a claim for enhanced rates to the Housing Commissioner.

The trial Court held that there was no valid contract in the eye of law between the parties because the Chairman of the Board had not himself signed the contract. The made a basis and hence the court held the entitlement of suit for claims on the doctrine of quantum meruit. Further considering the unusual increase in the rates of all relevant materials like labour and raw materials which led to a higher cost of project. Hence the firm suffered loss due to others faults and external factors. This fact made the agreement one sided. Hence the entitlement for interest.

But not supporting the proposition supreme court cited that quantum meruit cannot be awarded where the contract provided for consideration payable in that behalf. The Supreme Court held that the compensation of quantum meruit is awarded for work done or services rendered where the price is not fixed by the contract.

Citing the case of Hindustan Tea co. V. K. Shashikant co. [1986 supp. Scc 506]

Court reasoned the awards and dismissing the objections against the award of the arbitration.

The entire claim for the amount prayed for in the prayer clause of the plaint is for "carrying out the work of construction under the contract". The plea of the plaint that the Chairman is required to sign the contract on behalf of the Board and that, since the Executive Engineer had signed it, the agreement was per se illegal, and therefore, the respondent is entitled to claim for actual cost incurred by it on quantum meruit, is an ingenious effort to get away from the fact in the contract which debars them from any claim arising out of rise in cost of any items used in the construction of the project in question here. It could not have been the "actual cost incurred" as it was more than one year prior to the completion of the work by it. An overall view of the evidence reveals that the claim based on quantum meruit on the raised cost is just another way to impose payment on the on the other party which the respondent is not entitled to as per the contractual terms.

3)      Puran Lal Sah vs State Of U.P [1971 AIR 712] [7]

The case is about Contract-Claim on basis of quantum meruit-When sustainable. The Public Works Department of the respondent-State U. P. issued a tender notice for the construction of a road. The appellant went to inspect the site, to the place where stone could be available. Estimated and submitted a tender below the estimates in the tender notice. The state accepted and a contract was signed. The stone was available at that distance in the Cantonment area but a permission of the Cantonment authorities had to be taken, which appellant was not able to obtain. Hence got stones from a much longer distance. He commenced work and completed. The Executive Engineer recommended his case for a higher rate.

Also, Appellant undertook to execute some additional work for the department and ended up performing the quantity of work far in excess of mentioned in the contract. For this additional work also, he claimed higher rates. Since he did not get the higher rates he claimed, he filed a suit which was dismissed by the High Court in appeal.

Though in that case the basis of the principle was not explained, it nonetheless lays down that where work is done under a contract pursuant to the terms of the contract then any amount cannot be claimed on the basis of quantum meruit. In the view taken was on the facts of the case, and not propose to examine the decisions cited at the Bar in this behalf. The claim of the appellant for higher rates which in fact was by way of damages has been rightly disallowed by the High Court.

[1] https://dictionary.law.com/Default.aspx?selected=1692(visited on 25th January 2021) [2] Indian Contract Act, Act No. 9 of Year 1872 section 65 [3] Indian Contract Act, Act No. 9 of Year 1872 section 70 [4] https://www.srdlawnotes.com/2017/12/what-isquantum-meruit-when-does-claim.html (visited on 25th January 2021) [5] https://www.casemine.com/judgement/in/5609ae86e4b014971141408f(visited on 25th January 2021) [6] https://www.casemine.com/judgement/in/560911dce4b0149711185463(visited on 25th January 2021) [7] https://indiankanoon.org/docfragment/1394427/?formInput=quantum%20meruit(last (visited on 25th January 2021