Understanding Quantum Meruit Claims in Australia

Author: Zeinab Farhat, Progressive Legal

In the complex landscape of contractual agreements, business transactions, and legal disputes, it’s essential for business owners to be familiar with various legal concepts that could impact their operations. One such concept that often surfaces is the intriguing principle of “quantum meruit”.  

In this article, we consider the following: 

1. what is quantum meruit?;  
2. quantum meruit in Australian contract law; 
3. when does a quantum meruit claim arise?;  
4. what are the elements of a quantum meruit claim?; 
5. what is a reasonable sum in quantum meruit claims?; 
6. quantum meruit vs breach of contract; 
7. the significance for business owners; 
8. navigating quantum meruit claims;  
9. when else is a claim for quantum meruit not available; and  
10. key takeaways.

What is quantum meruit? 

Derived from Latin, “quantum meruit” translates to “as much as he deserves.” In legal terms, a quantum meruit claim arises when one party seeks compensation for the value of goods or services provided to another party under circumstances where no formal written contract or agreement exists.

A quantum meruit claim relates to the payment of money which is “fair” and “reasonable” in light of the work or services conducted. It is important to note, a claim in quantum meruit does not arise if there is a contract already existence which is on foot and covers an agreed sum to be paid by the contracting parties. 

Ultimately,  theconcept aims to prevent unjust enrichment, ensuring that a party is not unfairly benefited at the expense of another’s efforts. 

Quantum meruit in Australian contract law

In Australia, quantum meruit claims fall under the broader umbrella of contract law. When parties engage in a transaction without a formal contract or agreement, Australian law recognises that the party providing goods or services still deserves to be fairly compensated.  

This recognition is rooted in the principle of fairness and the idea that individuals should not be left without compensation for their efforts. 

When does a quantum meruit claim arise?

A quantum meruit claim comes into play in various scenarios where services are provided without a formal contract. These situations could include: 

Verbal agreements

In the fast-paced world of business, verbal agreements are not uncommon. In fact, many business owners (particular those of a smaller nature) find themselves entering into oral agreements on a regular basis. If one party provides goods or services based on an informal arrangement, a quantum meruit claim may arise if compensation is not fulfilled. 

Implied contracts

While explicit contracts are standard, sometimes parties might engage in transactions without outlining the terms in writing. If one party receives a benefit from the other’s efforts, a quantum meruit claim might be pursued to ensure just compensation. 

Partial performance

In cases where a party partially fulfills their obligations under a contract that is later deemed unenforceable, a quantum meruit claim could arise to compensate for the value of the services rendered. 

Ineffective or no genuine agreement

A claim in quantum meruit may also arise where a contract is ineffective, and/or there is no genuine agreement in place. It may also arise where the agreement has been frustrated, avoided or is otherwise unenforceable. 

What are the elements of a quantum meruit claim?

To establish a successful quantum meruit claim, certain elements must be satisfied: 

What is a reasonable sum in quantum meruit claims? 

One of the central aspects of a quantum meruit claim is determining a reasonable sum for the provided goods or services. This can be a point of contention, and the court considers various factors to arrive at a fair compensation. Some of these factors include: 

Market rates

Courts often assess the prevailing market rates for similar goods or services to determine a reasonable sum. This helps ensure that the claimant is compensated fairly based on industry standards. 

Nature and quality of services

The nature, complexity, and quality of the goods or services provided are taken into account. A higher level of skill or expertise may warrant a higher compensation. 

(If applicable) Contract

If there is an applicable contract, consideration should be had to whether it provides any guidance for the calculation of costing the work. 

Time and effort

The amount of time and effort invested in providing the goods or services is considered. This includes the duration of the engagement and any extra effort beyond the ordinary. 

Benefit received

The extent to which the other party benefited from the goods or services is crucial. A significant benefit may justify a higher compensation. 

Expenses incurred

If the claimant incurred expenses in providing the goods or services, these may be factored into the determination of a reasonable sum. 

Bad faith

A Court may also consider whether a party, or parties, have engaged in bad faith. 

Quantum meruit vs. breach of contract 

It’s important to differentiate quantum meruit claims from breach of contract claims. While both involve compensation, they address distinct scenarios: 

As discussed, quantum meruit claims arise in situations where no formal contract exists. They aim to ensure fairness and prevent unjust enrichment. 

In contrast, breach of contract claims occur when one party fails to fulfill their obligations as outlined in a formal contract. This breach may lead to damages or specific performance remedies.

The significance for business owners 

Business owners should be aware of the potential implications of quantum meruit claims for several reasons: 

Protection against unforeseen situations

In the fast-paced world of business, not all transactions are documented through formal contracts. Quantum meruit claims offer a safety net for situations where agreements are made verbally or informally. 

Fair compensation

Quantum meruit claims ensure that the value of goods or services provided is recognised and compensated for, preventing one party from unfairly benefiting at the expense of another. 

Dispute resolution

When disputes arise due to the absence of a formal contract, quantum meruit claims provide a legal avenue to resolve conflicts and determine appropriate compensation. 

Mitigating unintended liabilities

Business owners who engage in transactions without formal contracts may inadvertently create liabilities. Understanding quantum meruit can help mitigate such unintended legal consequences. 

Navigating quantum meruit claims 

While quantum meruit claims offer a path to fair compensation, they can also be complex to navigate. Business owners can take certain steps to ensure a smoother process: 

Documentation

Even in informal transactions, documenting the details of the agreement, including the scope of goods or services and the intended compensation, can provide valuable evidence in the event of a quantum meruit claim. It is important to keep contemporaneous documentation, which can include dated file notes of phone calls which you had with the other party.

Such documentation can help if you are the party seeking to enforce a claim for quantum meruit, or alternatively, being the party arguing against such a claim. 

Seek legal advice

Consulting with legal professionals who specialise in contract law can provide business owners with insights into their rights and responsibilities, helping them make informed decisions. 

Engage in alternative dispute resolution

Instead of resorting to costly litigation, parties involved in a quantum meruit claim may consider alternative dispute resolution methods, such as mediation or negotiation, to reach a mutually satisfactory outcome. 

When else is a claim for quantum meruit not available? 

The High Court’s decision in Mann v Paterson Constructions Pty Ltd [2019] HCA 32 provided some clarification regarding the position of quantum meruit in the common law, with a specific focus on the repudiation of building contracts. 

The Court held, among other things that: 

1. quantum meruit is not available for work which is done before the termination of contract, and to which the builder has accrued a right under the contract as at the date of termination; and
2. quantum meruit is available for work done prior to termination, only where the builder has not yet accrued a contractual right to payment for as of the date of termination.

Key takeaways

In the dynamic world of business, where agreements can be made in various forms, quantum meruit claims play a vital role in ensuring fairness and just compensation for businesses offering their products or services. Business owners should be mindful of this legal concept, understanding its principles and potential implications.  

By staying informed and taking proactive steps, business owners can navigate the landscape of quantum meruit claims with confidence, protecting their interests and upholding the principles of fairness in their transactions.  

If you have encountered a situation involving quantum meruit or require legal guidance, our experienced contract lawyers at Progressive Legal are here to assist you. Contact us today to ensure that your rights and interests are protected.