Why Quantum meruit claims are controversial in the industry? 2

Why Quantum meruit claims are controversial in the industry?

Quantum meruit meaning?

“Quantum meruit” is a Latin phrase that means “as much as he has deserved.” A reasonable remuneration or compensation deserves work done by a person or organization based on a retroactive agreement called quantum meruit. 

Quantum meruit claims in the Construction industry

What are these quantum meruit claims? When a contractor has executed a work without agreeing on reasonable cost or has completed partial work (which he agreed cost for complete works), the contractor claims a fair value of payment for the executed works is called the quantum meruit claim. Not only the above reasons, but there may also be various reasons a contractor may claim quantum meruit claim. I.e.,

When Contractor may entitle to Quantum meruit claims?

  1. Work is carried out based on a letter of intent which price is not agreed or mentioned.
  2. The client agrees to pay a reasonable amount, but the exact amount or unit rate is not decided initially.
  3. Variations or extra works carried out but fell outside the scope of works agreed initially by the client and contractor.
  4. Where executed works are failed to asses under the payment clause of the agreed contract.
  5. When completed, works are considerably different from what he has agreed/needed to do.

When the contractor claims the changed circumstances such as unpredictable ground conditions, they are preferred to use the quantum meruit claim to claim their expenses. But validating or getting approval for a quantum meruit claim is extremely difficult. Once raised, there will be so many ambiguities between the client and the contractor. The assessing process of the quantum meruit claim is not defined anywhere. To give you more insight into this, We can discuss the best case law regarding the quantum meruit claim: Serck control Ltd V Drake & Scull Engineering Ltd (2000).

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Quantum meruit claims case study- Serck Controls Ltd v Drake & Scull Engineering Ltd (2000)

This case is related to the development of a nuclear research facility for British Nuclear Fuels Limited. Serck Controls Ltd. was the appointed contractor for the control system of the facility. Their works included the design of the control system. However, the control system’s design and installation (by Serck) work was a part of the Mechanical and electrical main package. This package (electrical works) was awarded by Drake & Scull engineering Ltd. Which means Serck Controls Ltd is the appointed subcontractor under Drake & Scull Engineering Ltd.

The main contract was initially issued to Wimpey Construction Limited. But later, they were replaced by Tarmac Construction Limited. So there are no formal agreements formulated between any of these parties. Drake and Scull argued that works carried out by Serck controls should evaluate referring to the value of work done by Drake and Scull. And Serck was claimed that they were entitled to a quantum meruit claim. 

The first issue that the Court has focused on was the contract between two parties. Serck never received a signed contract from Drake & Scull.

But, On 1st December 1994, a letter of intent was issued by Drake & Scull to Serck Controls. This letter contains an intention statement and guideline about how to continue the work. It further stated that if no agreement is signed, Drake & Skull will repay Serck with all legitimate costs. See below paragraph of LOI issued by Drake & Scull,

“In the event that we are unable to agree satisfactory terms and conditions in respect of the overall package, we would undertake to reimburse you with all reasonable costs incurred, provided that any failure/default can reasonably be construed as being on our part.”

D&S LOI To Serck 1st December 1994.
Quantum meruit claims
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The Court has accepted the 1st December 1994 letter of intent, As a binding contract between two parties. Furthermore, The Court has highlighted the point for compensation related to pay “all reasonable costs incurred” by Drake and Scull. And the Court has refused the argument by Drake & Scull, accepting that Serck should get paid based on reasonable remuneration method. But further to this decision court has refused to pay time (cost of extended time) extended for works since it is Serck’s responsibility.

As per this case, law related to the quantum meruit claims reminds us of the importance of agreeing on payment terms. Using quantum meruit claims for this type of complex projects can bring burdens to some parties.

The next important question is whether the contractor is entitled to quantum meruit claims when works were half-completed and abandoned by the same contractor. When the work awarded, the contractor’s experience and capacity matters for the successful completion of the project. Most of the time, workes received by inexperienced and incapable contractors are abandoned at the halfway stage. And they might be asked for remuneration based on quantum meruit claims for lousy and half-completed works. This practice may spoil the real value of the quantum meruit claims method. It is essential to have a proper system agreed to evaluate the quantum meruit claims in the industry.

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