Let's Be Reasonable: Quantum Meruit and Asian Equivalents

This was a talk given to the Lighthouse Club International Construction Conference on 5 May 2006.

It is very common for judges and arbitrators to consider one of the following situations:

1.	two parties have tried to negotiate the terms of a construction contract but eventually failed to do so, whilst in the meantime, one of the parties has been doing work at the request of the other
2.	works have been carried out in contemplation of a project that does not materialise

When the works are carried out, the burning question becomes: what about payment and how is it going to be assessed?

Where a contractor carries out works at the Employer's request in the absence of a contract, the law may impose on the Employer an obligation to pay a reasonable sum for the work done in response to that request. This is known as "quantum meruit", a Latin phrase commonly translated as 'the amount deserved' or 'what it (the work) is worth'.

It used to be thought that the basis of quantum meruit was an implied contract. However, it is now clear that the legal basis of quantum meruit rests in the law of restitution and the removal of unjust enrichment.¹ In the context of this conference, the basic question to be asked in each situation is:

has the employer been unjustly enriched at the expense of the contractor?

In this paper, I will consider:

1.	the usual battlegrounds where quantum meruit arguments are raised; and
2.	the appropriate assessment for quantum meruit.

Finally, to reflect the international nature of this conference, I will also briefly touch on equivalent principles in neighbouring jurisdictions, which are Macau, the PRC, Taiwan and Thailand.

When does the Right to Quantum Meruit Arise?

The concept of restitution and the broad nature of the remedy of quantum meruit can arise in many and varied situations. In the House of Lords decision of Banque Financière de la Cité v Parc,² Lord Steyn identified four questions arising in relation to any claim in restitution, which were:

(a)	had the defendant benefited or been enriched?
(b)	was the enrichment at the expense of the claimant?
(c)	was the enrichment unjust?
(d)	were there any defences?

If the answer to the first three questions is "yes" and the answer to the fourth question is "no", a claim for quantum meruit will succeed. I will not attempt to analyse each and every set of facts where the concepts apply, even if that is possible. Instead, I will comment on the situations where a claim for quantum meruit commonly arises in the construction industry. Unless otherwise stated, I will generally assume that the claims involve a developer and a contractor, but obviously the issues raised apply equally at subcontractor level and to claims made by consultants. In this context, the background is that at some stage there was or was intended to be a contract between the parties. For the purposes of the analysis, I have divided the type of disputes into two groups, namely where:

1.	the parties forgot to write the contract; and
2.	the parties forgot to read the contract.

Next: Forgetting to Write the Contract

Westdeutsche Landesbank Girozentrale v. Islington LBC [1996] AC 669 (See also Pavey v Matthews (1987) 162) CLR 221
Banque Financière de la Cité v. Parc (Battersea) Ltd and Others [1999] 1 AC 221