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Greanya Legal Services

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Quantum What? A guide to getting paid in business transactions

Posted on 12 December, 2018 at 22:30

by Daniel Greanya

To most people a contract is a written paper signed by both parties with agreed terms on it. In reality only a small number of contracts fit this description. A contract refers to the terms agreed by at least two people where one party provides something in exchange for something else from the other party (an exchange, known as consideration). Contracts can take the form of a signed piece of paper, but they can also be orally made, they can be a letter, or an email exchange between parties. A ticket with terms on the back is also a contract, made by the payment of consideration, which implies the acceptance of the terms on the ticket.

A contract assumes that people agree on the terms that they will abide by. The reality in day to day business transactions is that this does not always happen. Sometimes each side understands what was agreed differently, and if the difference is fundamental to the agreement, a Court may find that a contract was not made (that the parties did not come to an agreement at all). If an agreement is not made, there is no agreement for the courts to enforce, and yet often one or both parties have done what they promised (or thought that they did). If the court were merely to find that there is no contract to enforce, both parties could be out time and money, sometimes considerable time and money. This principle applies equally to situations where there are problems with goods/services provided (but are still not totally useless), or where the goods/services are partially provided.  In these situations, the legal principle of quantum meruit or unjust enrichment applies. Under quantum meruit, a party is entitled to compensation for the contribution that they have made to their end of the bargain. It allows the Court to assess the value of the goods and services provided by a party even where a contract has not been made, and order the party who has received the benefit of another party’s contribution to compensate that other party. For instance, suppose I tell a contractor to construct a deck for me. Now suppose that the contractor agrees to assess the project, draft plans, and purchase materials. The contractor assesses the project, drafts plans, and purchases materials, but then I tell him that his price is too high and I do not wish to proceed. The contractor is now out the work that he has put into the project, which may be considerable. He is not willing to let me off the hook for this amount so he sues me. To be clear, there is no contract, we have not agreed on a set price for the project or for the work done and I may not have even promised to pay a partial amount for his work. Despite this, I receive the benefit of the work to his detriment, and it would be unfair to allow me to escape payment for the work. The contractor can sue me under quantum meruit, and the court will assess the value of the work he has done, which I will have to pay for.

Quantum meruit is a very important tool to allow the Court to ensure that all parties are being treated fairly, and to prevent injustices. In the business world, it allows a goods/services provider to get compensated for the goods and services that they have provided, even where there has not been an agreement on the cost, or where not all of the work has been completed. If you think that quantum meruit applies to your situation, please contact my office at 647-701-5589 or [email protected]

DISCLAIMER: This article is intended as general information, and does not replace the advice of a Licenced Paralegal or Lawyer. For advice on your specific case, contact Greanya Legal Services directly.

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