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Quantum Meruit in Construction Law

This article briefly examines the concept of quantum meruit in construction law.  We discuss the landmark case of Pavey and Matthews Pty Ltd v Paul 1987 (HCA) which highlights this legal concept and sets out the circumstances in which payment for construction work without a written contract may occur.

What is Quantum Meruit?

Quantum meruit is a legal term that contends that a reasonable sum of money should be paid for services rendered or work done when the amount due is not stipulated in a legally enforceable contract.  The landmark case of Pavey and Matthews v Paul considered whether there was a quantum meruit claim independent of a contract and therefore not subject to the Building Licensing Act 1971 (NSW)

Pavey & Matthews v Paul

Background

The building and construction case involved the renovation of a property belonging to Mrs Paul and performed by Pavey and Matthews. The contract was orally agreed.  At the end of the renovation, Pavey and Matthews were paid $36,000. This was only a portion of what they claimed they were owed, which they believed to be the prevailing rate of $63,000.

The Issue of quantum meruit and the Judgment

The question that the case needed to answer was whether a quantum meruit claim could be independent of a contract and therefore avoid the Building Licensing Act 1971 (NSW).  The High Court of Australia did indeed uphold that the case was independent of the Builders Licensing Act 1971 (NSW).  The basis of this was not Mrs Paul’s promise to pay, rather it was the work done and her acceptance of this work.

The Court contended that although the Licensing Act allowed owners to withdraw from oral commitments, it did not enable them to avoid payment for work that they had requested and approved.

The builders would have received the lower amount only if Mrs Paul had withdrawn her promise before the work had begun and the builders had gone ahead anyway.

The court also noted that the amount rewarded could be no higher than the objective market rate for the work, even if Mrs Paul’s promise was for a higher price.

” Unjust enrichment in the law of this country constitutes a unifying legal concept which explains why the law recognises, in a variety of distinct categories of case, an obligation on the part of a defendant to make a fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognise such an obligation in a new or developing category of case”

The factors the High Court considered in this case

  1. Unjust enrichment
  2. Awarding restitution for this enrichment, (to the plaintiffs who were the builders Pavey and Matthews).
  3. The amount of this restitution being an equitable remedy referred to as quantum meruit.

Why BSM?

The highly experienced building and construction lawyers at Brander Smith McKnight are aware of the nuances of construction law and have represented a wide range of clients, including individuals, small and medium builders through to major building companies. Our lawyers are able to effectively and carefully draft contracts to mitigate the risk of future problems and strongly advocate for you in all contract disputes.  We will fiercely advocate for you at all levels of negotiation and dispute resolution including litigation.

Call us to arrange a free 20 minute no obligation consultation that includes case evaluation and cost estimate.

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