BREACH AND QUANTUM MERIT

This article is written by Akshara Maheshwari of 3^rd Semester of Maharashtra National Law University, Nagpur, an intern under Legal Vidhiya

ABSTRACT

Breach of contract is a usual phenomenon which occurs many a times due to the act of any of the parties involved in the contract. This breach may have monetary, physical, or mental repercussions on the party so affected due to that breach. In such situation, breach and quantum merit plays an important role. This article deals with that role only. It discusses about the meaning of quantum merit as a remedy for the breach of the contract. Further, it discusses about the correlation and interrelation between quantum merit and unjust enrichment. It also delves into the various judgements given by the court in development and growth of the principle of quantum merit in breach of contract.

Keywords

Quantum Merit, Breach of Contract, Unjust Enrichment, Judicial Interpretation.

INTRODUCTION

The Latin expression “quantum meruit” means “what one has earned.” It can also mean “what the job is worth” or “the amount one deserves” when translated into other similar expressions. Quantum meruit claims occur in a legal context when you finish work (completely or partially) without a contract in place. Alternatively, the work might be performed under an expired agreement. You are not compensated for the labor you have done in either scenario. In these situations, filing a quantum meruit claim could still allow you to get paid a “reasonable sum.”

There is always a chance that a contract will be broken, and there are a lot of different reasons why this can happen. Any breach of contract must also be followed by the making or providing of remedies by a court. A suit on quantum merit is one of the five remedies available to the party who has been wronged. Applying this remedy in a lawsuit necessitates a deep comprehension of quantum merit. It is also important to understand how and when to use quantum merit, as well as when the party who feels wronged can use it. 

Numerous remedies for breach of contract are provided by the Indian Contract Act[1] and the Specific Relief Act[2]. ‘Quantum Merit’ is one such remedy. It means “as much as he deserved” in Latin. The goal of this remedy is to give the plaintiff what they are entitled to for the services they performed. In situations where a price has not been agreed upon, this equitable remedy seeks to reimburse and restore the plaintiff for her services. Another analogous idea is “quantum valebant,” which translates to “as much as they were worth.” This remedy is comparable to quantum merit in that it seeks to give the plaintiff a fair price for the products they have sold. The only distinction between the two is that, whereas Quantum Valebant is for the goods sold or delivered, Quantum Merit is a remedy for providing the reasonable value of services rendered by the plaintiff.

In this article we will be discussing in detail about the remedies of breach of contract which includes quantum merit as a remedy. Then we will converse about the difference between quantum merit and unjust enrichment which are many times considered as similar, and at the end we discuss about the judicial interpretation and developments of the principle of quantum merit.

REMEDIES OF BREACH OF CONTRACT

A breach of contract occurs when one party violates a promise or agreement made by the other. Specifically, it occurs when one party fails to fulfill their obligation under the terms of the contract. The party who has been wronged by the other party may pursue a few remedies for breach of contract. Let us look.

1] Recession of Contract

A party may rescind a contract and demand that the other party fulfill their obligations if the other party breaches the terms of the agreement. Section 65[3] of the Indian Contract Act states that the party who rescinds the agreement must pay the other party back for any benefits they may have received. In addition, section 75[4] states that the party who renounces the contract is entitled to compensation in the form of money or damages for such a recession.

2] Sue for Damages

Section 73[5] states that the person who has suffered as a result of the other party’s breach of agreement is entitled to compensation for any losses or damages sustained during ordinary business operations. In cases where the loss is deemed abnormal, meaning it does not transpire during regular business operations, compensation for damages will not be granted. Two categories of damages are specified by the Act:

Liquidated Damages: The parties to a contract may sometimes agree on the number of damages to be awarded in the case of a breach. These are known as liquidated damages.

Unliquidated Damages: In this instance, the amount due as a result of the contract violation is decided by the courts or other pertinent authorities.

3] Sue for Specific Performance

This suggests that the person who breaks the contract will have to carry out their end of the bargain. In certain situations, the parties might be ordered by the courts to follow the terms of the agreement. The court has the power to order any party who violates the agreement to do so. This decree of specific performance is being granted in lieu of damages. For example, A decided to buy a plot of land from B. B then says no to selling. The courts may compel B to fulfill his obligation and sell A the land.

4] Injunction

For a negative contract, an injunction functions similarly to a decree for specific performance. A court order prohibiting someone from carrying out a specific act is known as an injunction. Therefore, to prevent a party to a contract from acting contrary to his word, a court may issue an injunction. A mandatory injunction prevents an unlawful act from continuing, while a prohibitory injunction stops an act from being committed.

5] Quantum Merit

Quantum merit is literally translated as “as much is earned.” If the other party prevents one party from fulfilling his performance in accordance with the terms of the agreement, the other party may be entitled to a quantum merit. For the portion of the contract that he has already finished, he must be paid fairly. This could be the amount paid for the services he has provided or the value of the work he has already finished.

QUANTUM MERIT UNDER INDIAN CONTRACT ACT, 1872[6]

The Latin expression “quantum merit” refers to the Indian Contract Act of 1872[7]. Its meaning is “what one has earned” or “to the extent that one has earned.” Said another way, it speaks to the true worth of the labor or services provided. This law suggests a promise to pay a reasonable amount for the labor and materials provided, even in the absence of a formal contract. Quantum merit, according to the Black Law Dictionary, is “as much as one deserves.” A situation known as a quantum merit occurs when one party benefits while the other receives nothing. This term in contracts refers to the advantage or enrichment that one party gets from the deeds of the other party. Stated differently, it implies that the recipient of the services has benefited unfairly and has to give it back to the source of the benefit. Two sections of the Indian Contract Act are typically utilized to initiate a Quantum Merit action. Quantum merit claims have been upheld under Sections 65[8] and 70[9].

As an example, “S” is the daughter and “M” is the father. They came to an agreement whereby “M” asked “S” to provide him with medical care while he was unwell. To compensate “S” for her services, “M” agreed not to draft a will and to leave her a reasonable portion of his estate after his passing. However, “M” died soon after, leaving nothing for “S” and giving his brother full ownership of the estates. In this instance, “M” profited unfairly from the services while “S” got nothing in exchange. In this instance, “S” is attempting to use the quantum merit remedy to obtain a portion of “M’s” estate. This concept is predicated on the notion that a party should be entitled to recovery when they have not been fairly compensated for the services they provided or when another party has been unjustly and unfairly enriched.

A quantum merit is a kind of quasi-contractual claim. As a remedy for breach of contract, a party may pursue legal action based on quantum merit. A suit on the basis of quantum merit is brought when one party fulfills part of a contract and there is later a breach of that contract or it is found that the contract is void or becomes void. The harmed party may file a lawsuit based on quantum merit in the following circumstances and demand payment in accordance with the products delivered or the work finished:

• When one party completes work toward the execution of a contract but the other party declines to carry out his share of the work. or stops the individual from carrying out the agreement.
• Section 65[10] of the Indian Contract Act, 1872 addresses situations in which a contract has been executed and then it is found to be void or to have become void after work has been completed on it.
• In cases where an individual benefits from a non-gratuitous act (a gift or service that is given or received without payment but for which the recipient is required to pay) without a written agreement between the parties, they are required to reimburse the recipient or return the item that was delivered.
• In situations where there is an implied or explicit contract to provide services but no agreement regarding compensation – in these circumstances, a reasonable compensation is due; the court will determine what constitutes a reasonable compensation, which is the quantum merit. The Indian Contract Act of 1872 provides an explanation of this idea in Section 70[11].
• In cases where a contract is divided and one party has fulfilled its obligations, the non-performing party may pursue a quantum merit lawsuit against the other parties.

This rule even applies to someone who is claiming quantum merit even though they are also guilty of breaching the contract; however, to do so, the two requirements listed below must be met:

• The agreement needs to be split up.
• Even though he had the choice to decline, the other party must have benefited from the part that was performed.

When a contract is indivisible and poorly executed, the party in default may be entitled to a lump sum payment and may also be able to reduce the amount for the poorly executed work provided certain requirements are met: the contract must be indivisible, be for a lump sum, be fully performed, and be poorly performed.

QUANTUM MERIT V. UNJUST ENRICHMENT

It is not uncommon for people to misunderstand the two ideas. The goal of both ideas is to stop one party from carrying out their end of the bargain, and the one doing so profits from the services provided without even having to pay for them. The two ideas differ in that unjust enrichment addresses situations in which payment for services is not received, whereas quantum merit addresses situations in which a just and reasonable amount should be paid. In a lawsuit based on quantum merit, the plaintiff, the service provider, must prove that the defendant, the service recipient, agreed to the services knowing that he would have to pay the plaintiff back for the services provided and that the defendant was unfairly enriched, or that he received something for nothing. To put it another way, it means that he was paid for the services but did not pay the provider back, which is against the terms of the agreement. When a written contract is silent on the matter, the fair market value of the rendered services is usually used to calculate the amount awarded in a suit based on quantum merit.

JUDICIAL INTERPRETATION OF PRINCIPLE OF QUANTUM MERIT

1. Moselle Solomon v. Martin & Co.[12]:

This ruling noted that this remedy is only available in situations where there is not an express contract in place, or quasi-contracts. This seems a little problematic because there may be instances in which an express contract is in place, but it may not specify a price or number of damages to be paid in the event of a breach.

2. Alopi Parshad and Sons Ltd. v. Union of India[13] –

In this instance, the court was correct to reject the claim because there is no reason a quantum merit claim should be granted when a contract has already been established that specifies the amount to be paid. Should these claims be accepted, it would make the conditions of the contract meaningless. 

3. Mulamchand v State of M.P.[14] –

The judge ruled that “if a claim for compensation is made by one person against another under Section 70, it cannot be on the basis of any subsisting contract between the parties but on a different kind of obligation.” In essence, the court noted that when there is an enforceable contract in place between the parties, claims under section 70[15] cannot be made. It is enforceable in situations involving quasi-contracts.

4. Puran Lal Sah v State of U.P.[16] –

Regarding this principle, the court clarified a few points in this case. First, it stated that the party who is not in default must bring a quantum merit claim for it to be successful. This claim is not transferable to the party that violated the contract. The court also clarified the distinction between a quantum merit claim and a claim for damages. Damages claim aims to place the plaintiff in a situation whereby the contract has been carried out after performance. On the other hand, a quantum merit claim aims to put the plaintiff back in the driver’s seat. It appears the agreement never happened.

5. Mahanagar Telephone Nigam Limited v Tata Communications[17] –

The court determined that a claim of quantum merit under section 70[18] is not maintainable where a contract already exists and specifies the damages in the event of a breach. A person’s only right is the amount specified in the main contract; any additional amount must be reimbursed. The court has also taken this position in past cases. It makes sense, but often this can cause problems because there are situations where extra effort or going above and beyond is required to finish the work, even in situations where there is a clear contract and agreed-upon prices. In these situations, the person who has to complete the task has suffered a setback, which has allowed the other party to prosper.

CONCLUSION

It is evident from a thorough examination of the quantum merit remedy that it must be reasonable and fair in accordance with the law. The theory upholds the equality of the parties and works to guarantee that, if someone renders a good or service, they should be entitled to the benefits of the contract. If, however, they are not compensated, they may pursue recourse through a lawsuit based on quantum merit.

When applied correctly, Quantum Merit is a very helpful medication. This remedy makes sure that no one benefits unfairly or unjustly from the services that someone provides. One of the core ideas of equity, it aids in making up for the loss that a party has suffered. It seeks to provide redress to all those who have toiled diligently for something they did not intend to do for free and whose benefit has been appropriated by another person. To be fair in these kinds of circumstances, one must be compensated for his services. Throughout the seventeenth century, common law gave rise to this remedy, which has since changed. It has undergone numerous changes and evolved in diverse settings over time. The British brought this remedy to India, where it has since evolved in the local environment.

REFERENCES

1. Alopi Parshad and Sons Ltd. v. Union of India, 1960 SCC OnLine SC 13.
2. Moselle Solomon v. Martin & Co., 1934 SCC OnLine Cal 354.
3. Mulamchand v. State of M.P., 1968 SCC OnLine SC 21.
4. Puran Lal Sah v. State of U.P., (1971) 1 SCC 424.
5. Tata Communication Limited v. Mahanagar Telephone Nigam Ltd., 2018 SCC OnLine TDSAT 210.
6. The Indian Contract Act, 1872, Acts of Parliament, 1872 (India).
7. The Indian Contract Act, 1872, Acts of Parliament, § 70.
8. The Indian Contract Act, 1872, Acts of Parliament, § 73.
9. The Indian Contract Act, 1872, Acts of Parliament, § 65.
10. The Indian Contract Act, 1872, Acts of Parliament, § 75.
11. The Specific Relief Act, 1963, Acts of Parliament, 1963(India).

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[1] The Indian Contract Act, 1872, Acts of Parliament, 1872 (India).

[2] The Specific Relief Act, 1963, Acts of Parliament, 1963(India).

[3] The Indian supra note 1 at § 65.

[4] The Indian supra note 1 at § 75.

[5] The Indian supra note 1 at § 73.

[6] The Indian supra note 1.

[7] The Indian supra note 1.

[8] The Indian supra note 3.

[9] The Indian supra note 1 at § 70.

[10] The Indian supra note 3.

[11] The Indian supra note 9.

[12] Moselle Solomon v. Martin & Co., 1934 SCC OnLine Cal 354.

[13] Alopi Parshad and Sons Ltd. v. Union of India, 1960 SCC OnLine SC 13.

[14] Mulamchand v. State of M.P., 1968 SCC OnLine SC 21.

[15] The Indian supra note 9.

[16] Puran Lal Sah v. State of U.P., (1971) 1 SCC 424.

[17] Tata Communication Limited v. Mahanagar Telephone Nigam Ltd., 2018 SCC OnLine TDSAT 210.

[18] The Indian supra note 9.

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