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PRINCIPLE OF “QUANTUM MERUIT” IN INDIAN CONTEXT
Author: Ankita
ABSTRACT:
The Latin term “quantum meruit” one of an important concepts of the law of contract has draw
much attention recently. As the Hon’ble Apex Court of the Country has been freezed with the
issue that whether quasi-contractual obligations can be imported into a contract which already
stipulates a sum for its breach. The Latin term is based on equitable doctrine, based on the
recovery should be granted to one party to obtain the value of their services when another party
was unfairly and unjustly enriched. Taking into account, the recent judgement of Supreme Court,
this article examines the meaning of the term “quantum meruit”, when it can be claimed by a
party and the evolution of the concept in India. This ends with the conclusion that status of the
concept of “quantum meruit” is not properly recognized under Article 70 of the Indian Contract
Act, 1872.
KEYWORDS: Quantum Meruit, Services, Contract, Unjust Enrichment, Parties.
MEANING OF QUANTUM MERUIT:
The expression “quantum meruit”, one of the most popular expression used in today the field of
law of contract is a Latin expression, that literally means “as much as is deserved”.1 However, its
meaning is not clear and the definition varies slightly from one judicial system to another
because of different legal decisions that have interpreted the term. From the theory of
contractual law, it means something along the “reasonable bars of service”.2
It is an equitable doctrine, based on the concept that no one who has received the services, labour
and material is unjustly benefited and must return it to the party who provided such benefit. The
law implies a promise to pay a reasonable amount for the labour and material furnished , even if
1
Black Law Dictionary, ed. 8th, 2012. p.1573.
2
Daniel Friedman, “Restitution of Benefits Obtained Through the Appropriation of Property or the Commission of
a Wrong”, 80 Colum. L. Rev. 504 (1980).
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there is no specific contract.3 This fosters equity of the parties and helps to ensure that if a person
provided a service or a good, that person receives the benefit of the contract. It is an important
theory in law because it allows a court to provide a fair result in an unfair situation.4
INTRODUCTION:
When parties enter into a contract there is a possibility for the breach of the contract and breach
can be due to several reasons. For any breach, it is necessary that the remedies should also be
made or should be given by any Court. Out of various remedies which are available to the
aggrieved party, one is a suit upon quantum meruit.
The theory of “quantum meruit” is based upon the idea that recovery should be granted to one
party to obtain the value of their services when another party was unfairly and unjustly enriched. 5
Traditionally, courts assessed a quantum of damages, where work was performed pursuant to a
contract, but no agreement was reached on the amount, the court would just determine what was
fair. Whereas, in some judicial systems, it is the court’s method of calculating damages arising
from a contract, when the contract is unclear. The premise for the claims is that loss cannot be
recovered adequately under the current contract, for one reason or another. It is actually, asking
the court to award damages based on the value of the work performed.6
A suit for “quantum meruit” arises when there is no verbal or written contract but it is
understood that one should get what he deserves. Although the existence of it as a remedy does
not depend on a contract, yet it is a remedy provided under the contractual laws, where a contract
has been breached but after one side received partial or full benefit, and the contract does not
include a clause providing for this eventuality.
Generally, a party cannot claim performance from another unless one has performed his
obligation in full. But in certain cases, a person who performed some work under a contract can
claim remuneration for the work which he has already done. The right to claim on “quantum
meruit” does not arise out of contract as right to damage does. It is a claim on quasi contractual
3
Akhileshwar Pathak, “Contract Law”, IIM Ahmedabad, ed. 1st, (2011) at. p. 311.
4
WC Gray (Constructions) Pty Ltd v. Hogan, (2000) NSWCA 26.
5
Available at : https://contractlawsandpractice.blogspot.com/2015/09/quantum-meruit.html (last visited: 10 June
2020).
6
John H. Munkman, The Law of Quasi-Contracts 87 (1950), cited in Judy B. Sloan, Quantum Meruit: Residual
Equity in Law, 42 DePaul L. Rev. 399 (1992)
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obligation which is implied by circumstances. Also, it is necessary that the claim under it arises
only when the actual contract is discharged.7
Success in such suit depends not only on the plaintiff proving that he/she did the work, but also
on the defendant’s acceptance of the work without paying the agreed remuneration.
The “quantum meruit” can be used in Contractual quantum meruit as well as in Restitutionary
quantum meruit. Contractual quantum meruit can be used where there is a genuine contract for
remuneration but the contract fails to prescribe a price and the measure would be provided by
courts as award of reasonable price for doing the work. Whereas, in Restitutionary quantum
meruit there is no genuine contract i.e. the work performed is not subject to a contract or the
contract has ceased to exist and the measure by the court would be an amount equal to the value
of the benefit received.8
QUANTUM MERUIT AND INDIAN CONTRACTUAL LAWS:
The are several instances where the theory of “Quantum meruit” can be applied or claim of
quantum meruit arises. Some of those instances are briefly discussed below.
a. In void agreement or contracts that become void: In Section 659 of the Indian Contract
Act, 1872, the circumstance that where work has been done in the execution of the
contract but later it is discovered that the contract is void or it becomes void has been
dealt with. It provides that
7
Kailash Chander Srivastava, “The Rationale of Quasi-Contract” (1961) SCJ 35at p.41.
8
William Lacey (Hounslow) Ltd v. Davis, [1957) I W.L.R. 932.
9
Section 65: 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. —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.
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b. In case of gratuitous acts: Under section 70 10 of the Indian Contract Act, 1872, deals with
obligations of person enjoying benefit of non- gratuitous acts. It provides that Where a
person enjoys the benefit of a non-gratuitous act (given or received without payment but
where the party was obliged to pay) despite the fact that there is no express agreement
between the parties, then the person who has enjoyed the benefit has to compensate the
other party or restore the thing so delivered. But the obligation to pay arises only when
three conditions are fulfilled i.e., a. the things must have been done or delivered lawfully;
b. the person who had done or delivered the thing must not have intended to so
gratuitously; and c. the person for whom the act is done must have enjoyed the benefit of
the act.
c. Act preventing the completion of Contract: If a party does not complete the contract or
prevents the other party from performing the contract, the aggrieved party can sue the on
quantum meruit.11
d. Divisible Contract: Where the contract is divisible, and a party to the contract has done its
part, he may sue other parties who have not performed for quantum meruit. Even when a
person who is claiming quantum meruit is himself guilty of the breach of the contract he
can sue for it if, thetwo conditions are fulfilled. These two conditions are: a. contract
must be divisible; and b. other party must have enjoyed the benefit of the part which has
been performed, although he had the option of declining it.
e. Indivisible contract performance completed but badly performed: Where the contract is
indivisible and performed in a bad way, the party at default can claim a lump sum amount
but has to reduce the amount for the bad work done if following requirements are
satisfied: a. the contract should be indivisible; b. it should be for a lump sum amount; c. it
should be completely performed; and d. it was performed badly.12
10
Section 70: 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 other person enjoys the
benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done
or delivered.1 —Where a person lawfully does anything for another person, or delivers anything to him, not
intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make
compensation to the former in respect of, or to restore, the thing so done or delivered.
11
Available at : https://study.com/academy/lesson/quantum-meruit-definition-theory.html ( last visited: 12 June
2020).
12
Available at : https://study.com/academy/lesson/quantum-meruit-definition-theory.html (last visited: 12 June
2010).
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DIFFERENCE BETWEEN THE CONCEPT OF QUANTUM MERUIT AND UNJUST ENRICHMENT:
Unjust enrichment is known to construction industry by the term “quantum meruit” but both the
terms are not synonymous. Unjust enrichment offers two important remedies: a. Quantum
meruit; and b. a constructive trust.13
Quantum meruit is the award made on a claim based on unjust enrichment. Quantum meruit is to
unjust enrichment what damages are to breach of contract or tort. Unjust enrichment is
compensated by an award of quantum meruit , while breach of contract and tort are compensated
by an award of damages. Sometimes damages and quantum meruit are equal in amount but, this
is a mere coincidence because both of them are calculated differently.14
Thus, to be successful in a suit for quantum meruit, the service provider must prove that the
receiver of the services, knowing that he has to pay for the services provided and that the he was
unjustly enriched, which means he received something for nothing. 15 In a claim of quantum
meruit, the plaintiff does not seek a precise sum of money, nor a sum representing the general
damages incurred by the plaintiff as a consequence of some unjust act on the part of the
defendant, but a sum which will provide the plaintiff, the value of what the plaintiff has done for
the defendant, usually calculated in terms of the market price or value of those services. 3 The
amount given in a suit upon quantum meruit, especially where there is no written contract
specifying an amount, is generally based on the fair market value for the services rendered.
However, the basic difference between both is that in unjust enrichment, there may not have ever
been any agreement to begin with, where as in quantum meruit, there is an agreement but the
agreement never specified a price.16
THE JUDICIAL TREND FOLLOWED BY INDIAN COURTS:
13
John D. Calamari & Joseph M. Perillo, “The Law of Contracts”, ed. 2nd (1977).
14
W. Carter, "Ineffective Transactions," in P.D. Finn, ed., Essays on Restitution (North Ryde, N.S.W.: Law Books
Co., 1990).
15
John H. Munkman, The Law of Quasi-Contracts 87 (1950), cited in Judy B. Sloan, Quantum Meruit: Residual
Equity in Law, 42 DePaul L. Rev. 399 (1992).
16
Available at : https://mercantilelaws.blogspot.com/2012/09/suit-upon-quantum-meruit.html (last visited: 10 June
2020).
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The courts have dealt with the suit for “Quantum Meruit” under Section 70 17 of the Indian
Contract Act, 1872 . Some of the judicial pronouncements in India dealing with the applicability
under Indian Contractual laws.
1. Recently, in Mahanagar Telephone Nigam Limited v. Tata Communications18, the
Supreme Court of, India differentiated between the claims in quantum meruit and the
damages in breach of contract. The issue was, when parties are governed by contract, a
claim in quantum meruit under Section 70 of the Indian Contract Act, 1872, would be
permissible or not. While deciding the aforesaid question, the Court referred to Moselle
Solomon v. Martin & Co.19 case where Lord William. J held that “the remedy provided
by Section 70 is not dependent upon the law relating to the liabilities of principal and
agent. It is an independent remedy, which is based upon a different cause of action,
namely, upon whether a person has lawfully done anything for another or has delivered
anything to him not intending to do so gratuitously, and such other person has enjoyed
the benefit thereof.” If so, he must either make compensation in respect of, or restore the
thing so done or delivered20. Whereas Jack. J held that where there is an express contract,
Section 70 has no application, as shown by the heading of Chapter V of the Act, in which
the section finds a place.14 The Supreme Court, in light of the above position, held that the
amount deducted by MTNL was a claim of quantum meruit which cannot be raised due to the
existence of the contract. The compensation for breach of a contract was deemed to be governed
by section 74 of the Indian Contract Act, 1870, which states that where a sum is named in a
contract as a liquidated amount payable by way of damages, only reasonable compensation can
be awarded not exceeding the amount so stated 21. Therefore, MTNL can claim only the sum
stipulated in the contract and any anything claimed above this sum shall be refunded accordingly.
2. The Supreme Court dealing with an arbitration award which awarded certain amount on
the basis of quantum meruit in Alopi Parshad and Sons Ltd. v. Union of India22, has
17
Obligation of person enjoying benefit of nongratuitous act—where a person lawfully does anything for another
person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit
thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or
delivered
18
(2019) 5 SCC 341.
19
( 1935 )ILR 62 Cal 612.
20
( 1935 )ILR 62 Cal 612.
21
Kailash Nath Associates v. DDA, (2015) 4 SCC 136.
22
AIR 1960 SC 588.
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set aside the amount awarded and held that, “Compensation under quantum meruit is
awarded for work done or services rendered, when the price thereof is not fixed by a
contract. For work done or services rendered pursuant to the terms of a contract,
compensation quantum meruit cannot be awarded where the contract provides for the
consideration payable in that behalf. Quantum meruit is but reasonable compensation
awarded on implication of a contract to remunerate, and an express stipulation
governing the relations between the parties under a contract, cannot be displaced by
assuming that the stipulation is not reasonable.”
3. In Mulamchand v. State of M.P.23, it was held that, if a claim for compensation is made
by one person against another under Section 70 of the Indian Contract Act, 1870, it
cannot be on the basis of any subsisting contract between the parties but on a different
kind of obligation.
CONCLUSION:
The concept of “quantum meruit” promotes the equity of the parties and helps to ensure that if a
person provided a service or a good, that person receives the benefit of the contract. It is very
important concept in law because it allows a court to provide a fair result in an unfair situation.
However, in Indian the evolution of the concept is at par with the common law. The status of the
evolution of section 70 of the Indian Contract Act, 1872, is, believed to be improperly
recognized under the Indian law of contract. Holding a claim under quantum meruit as only a
restitutionary claim and not a contractual one is a deviation from the evolved contractual laws
across the globe and the hon’ble Supreme Court here has missed a golden opportunity to bring
the claims in quantum meruit where there is already a stipulation of liquidated damages in a
contract.
23
AIR 1968 SC 1218.
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