Principles of Quantum Meruit and Claim for Quantum Meruit under the Indian Contract Act

This Article is written by CA Preeti Aggarwal, through an e-learning platform provides CA foundation and CA inter law video lectures. In this article, she discusses the principle of quantum meruit and how to claim quantum meruit under Indian Contract Act.

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1. Introduction
   When parties enter into a contract there is a possibility that they may fail to perform their promises and thus commit breach of the contract. In this case, the aggrieved party (i.e the party not at default) has various remedies against the party committing breach.

Remedies for Breach of Contract
A remedy is the course of action available to an aggrieved party for enforcement of a right under a contract.
There are various remedies available for breach of contract, such as
1) Rescission of contract
2) Suit for specific performance
3) Suit for injunction
4) Suit upon quantum meruit
5) Suit for damages

Claim for quantum meruit is one of the remedies available for breach of contract

Meaning of Quantum Meruit

Quantum meruit is a Latin phrase and is related to the Indian Contract Act, 1872.

The term quantum meruit means ‘as much as is merited’ or ‘as much as is earned’. In other words, it means payment in proportion to the amount of work done. Where one party has performed part of his promise and then there is breach of contract, or the contract is discovered void or become void, claim for quantum meruit arises.
Unlike suit for damages, the right to claim on ‘quantum meruit’ does not arise out of a contract. In fact, it is a claim on the quasi-contractual obligations which is implied by the circumstances. The claim for quantum meruit arises only when the original contract is discharged.

For example,A engages B, a contractor, to build a three storied house. After a part is constructed A prevents B from working any more. B, the contractor, is entitled to get reasonable compensation for work done under the doctrine of quantum meruit in addition to damages for breach of contract.

How to claim remedy under quantum meruit
The aggrieved party may file a suit upon quantum meruit and may claim payment in proportion to work done or goods supplied in the following cases:

a) In case of void agreement or contract that becomes void [Section 65]
When an agreement is discovered to be void or when a contract subsequently 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. In simple words, this is a case in which an agreement is either void-ab-initio or the contract becomes void at a later time. Hence, the benefit received by either party shall have to be returned to the other party.
For example, A pays ₹10,000 to B, in consideration of B’s promise to sell his horse to A. But unknown to both the parties, the horse is dead at the time of promise. The agreement is void and B must repay ₹10,000 to A.

b) In case of non-gratuitous act [Section 70]
The obligation to pay arises if the following three conditions are satisfied:
i) The thing must have been or delivered lawfully
ii) The person who had done or delivered the thing must have not intended to do so gratuitously;
and
iii) The person for whom the act is done must have enjoyed the benefit of the Act.
For example, A, a trader, leaves certain goods at B’s house by mistake. B treats the goods as his own. He is bound to pay A for them.

c) In case of act preventing the completion of contract
If a party does not complete the contract or prevents the other party to complete the contract, the aggrieved party can sue on quantum meruit.
For example, P agreed to write a volume on ancient armour to be published in a magazine owned by C. For this, he was to receive $100 on completion. When he had completed part of the work, C abandoned the magazine. P was held entitled to claim damages for breach of contract and payment under quantum meruit for the part already completed. (Planche vs Colbum)

d)In case of divisible contract
The party at default may sue on quantum meruit if the following conditions are satisfied:
(i) If the contract is divisible; and
(ii) If the party not at default has enjoyed benefits of the part performance.
For example, X agreed to repair Y’s house for ₹1 lakh. But he abandoned the contract after having done 3/4^th of the work. Afterwards, Y got the work completed. X cannot recover anything for the work done because the contract was indivisible, and he was entitled to the payment only on the completion of the work.

e)In case of indivisible contract performed completely but badly
The party at default may claim lumpsum less deduction for bad work if the contract is indivisible but is performed completely though badly.
For example,X agreed to decorate Y’s flat for a lumpsum of ₹20,000. X completed the work, but Y complained of faulty workmanship. Y spent another ₹5,000 to correct the defect. It was held that X could recover only ₹15,000 from Y.

Conclusion
After a proper analysis of the remedy of quantum meruit, it is clear that the law requires it to be fair and reasonable. The theory supports equality of the parties and helps to ensure that if a person provides a service or a good, then he should receive the benefit of the contract.