This article originally appeared in The Construction Economist. The Construction Economist is a publication of the Canadian Institute of Quantity Surveyors (CIQS) and can be found at http://www.ciqs.org/english/the-construction-economist.
Most construction lawyers include a pro forma paragraph in their standard construction lien and breach of trust claims seeking payment on the basis of quantum meruit. Given the limited information one sometimes has when issuing a claim, most lawyers reasonably subscribe to the principle that it is better to have and not need then it is to need and not have. Accordingly, claims for payment on a quantum meruit basis are often essentially ignored throughout most of the litigation, which may be detrimental to the parties if the argument is finally pursued at trial.
This article provides a brief overview of a few examples where Canadian courts have found that a contractor is entitled to payment on a quantum meruit basis as well as some criteria for substantiating such a claim.
For those of us who did not have the privilege of studying Latin in high school, quantum meruit means "as much as he has deserved" and is a legal maxim that has been applied by Canadian courts to award damages in an amount considered reasonable to compensate a party who has rendered services in a quasi-contractual relationship.
Under Ontario's Construction Lien Act, the definition of the term "price" is broad enough to permit the price of services and materials to be determined on a quantum meruit basis, typically where no specific price has been agreed to, and it is possible for a trade/supplier to register a lien based on the reasonable value of the work.
Given the sophisticated contractual relationships on most construction projects, at first glance, one could surmise that quantum meruit would have a very limited application in today's construction industry.
However, Canadian courts have found contractors to be entitled to payment on a quantum meruit basis where:
1. The contractor performed work for
an owner in respect of which there never was an agreement as to the
amount of payment (e.g., extras where the parties have not agreed
to the value of same);
2. The work has been performed even though circumstances have
changed so fundamentally that the original payment provisions are
no longer applicable;
3. A contractor's estimate is not binding because it was based
on insufficient information provided by the owner;
4. The contract does not contain express or implied payment terms
or price or the terms are confusing and/or contradictory; and
5. The contract is abandoned by both parties and only a portion of
the work is completed.
With respect to point 5 above, where the terms of a contract are substantially complied with, payment on the basis of quantum meruit is typically limited to the price agreed to under the contract. Meaning that if a trade under bid a project, its quantum meruit claim would be limited to a percentage of the total contract value for the work done even though the value of the work under normal circumstances would be greater.
In all of the above circumstances, it is important to note that the onus is on the contractor seeking payment on a quantum meruit basis to prove costs and expenses incurred and the reasonableness of same, which may be problematic at trial.
As quantum meruit is sometimes treated as an afterthought throughout litigation, contractors and trades do not always put forth the necessary evidence to prove the value of their work and leave, to their detriment, the court in the unenviable position of having little evidence to work with and/or internal records that are unreliable.
Accordingly, although quantum meruit may assist in allowing a contractor to receive fair compensation, in order to effectively use same, contractors and suppliers need to ensure that they put forth sufficient credible evidence to substantiate the reasonableness of their claim and, possibly, retain an expert in order to review their records and prepare a valuation.
Similarly, an owner or contractor defending such a claim should also ensure that they have requested all of the trade's records, reports, quotes, et cetera, so they may prepare their own responding valuation.
In short, when it becomes apparent that the method of valuing the work will be at issue and quantum meruit will be more than a pro forma paragraph in a standard claim, the parties must not simply rely on the pleadings, but take pro-active steps to give the court the necessary evidence to determine "as much as he has deserved".
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
