A builder has a right to payment for work completed under a construction contract. A contractor asserts this right (also called a ‘quantum meruit’ claim) when they cannot make a contractual claim. Quantum meruit claims are grounded in the principle of ‘unjust enrichment’ – that is, where the principal has been unjustly enriched by the benefit of the work completed at the contractor’s expense. Essentially, a contractor can make a claim for the reasonable value of the construction work completed at the owner’s request. Below, we set out when a builder can make such a claim and what they must prove to succeed.
When Can a Builder Make a Quantum Meruit Claim?
As stated above, a builder will likely make a quantum meruit claim when he or she cannot make a contractual claim, for example:
- Where there was a contract, but it was made void, terminated, frustrated or is otherwise unenforceable.
- The builder has undertaken contractual works. However, the principal has requested they complete additional work outside of the contract.
- There is a contract between the parties, but it does not provide a price for the work or a pricing mechanism to calculate the value of the work.
- Where parties are negotiating a contract but the contractor has already started works on site.
The most common situation is where the contract is either void, terminated or unenforceable.
What Must a Claimant Prove?
If you are initiating a quantum meruit claim, you need to establish what damages you are entitled to receive. This is unlike a contract case where the court awards damages to put the innocent party in the position they would have been had the contract been performed.
Although the court has not provided clear guidelines on how to determine a ‘reasonable sum’, it will consider the following factors:
- Did the contract (if one existed) provide any guidance or formulas?
- What would the ordinary commercial rate for the work be?
- What is the quality of work completed?
- How have the parties conducted themselves?
Can a Contractor Make a Claim?
The Victorian Court of Appeal in Sopov & Anor v Kane Constructions Pty Ltd (No.2)  VSCA 141 considered whether the contractor could make a claim outside of the contract. In this case, the contractor has ‘substantially’ completed the works, however, the owner’s conduct brought the contract to an end. The Court was then required to make a determination on the fair and reasonable value the principal received from the contractor performing the building works. In its decision, the Court affirmed the quantum meruit entitlement and made the following key points:
- The contractor must show the Court that the amount charged for the works was reasonable under the circumstances. The evidence of this is the actual costs incurred. There may also need to be evidence of what a comparable builder in the circumstances would have charged.
- Even if there was previously a contract in place between the parties that provided a price, a quantum meruit claim might actually exceed the amount specified in the contract.
A quantum meruit claim assists an aggrieved party by awarding them damages for fair and reasonable work performed in circumstances where a contract does not exist between the parties. If you have any questions or need assistance drafting your claim, get in touch with our disputes lawyers on 1300 544 755.
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