Quantum Meruit

There are various aspects to a construction project which we are able to assist our clients in including both contentious and non-contentious matters. Having arbitrator on our team also lends credence to the expertise that we are able to provide in order to solve your construction needs.

In the event that an employer is in default, a contractor can choose to claim under loss and/or expense clauses in the contract or bring legal action to recover his expenses and losses under the principle of quantum meruit. What is Quantum meruit? Quantum meruit means “the amount he deserves” or “as much as he has earned”.

An action in quantum meruit is available to recover money for services or goods supplied to a defendant in circumstances where the claimant is not recompensed by performing his obligations or supplying the goods. Generally, the claimant must show that the defendant expressly or impliedly requested or freely accepted the services or goods in question. SECTION 71 CONTRACTS ACT 1950: 

“Obligation of person enjoying benefit of non-gratuitous act"

71. Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.”

In the Supreme Court case of AYER ITAM TIN DREDGING MALAYSIA BERHAD V YC CHIN ENTERPRISE SDN BHD [1994] 2 MLJ 754 whereby in this case the Learned Judge in deciding whether there was a concluded contract between the parties, dealt with both the nature of letters of intent and quantum meruit. He held that arrangement made ‘subject to contract’ or ‘subject to the preparation and approval of a formal contract’, or in similar terms, would mean that the parties were still negotiating and did not intend to be bound until a formal contract was made. ‘Subject to contract clause’ terms would not prevent the formation of a contract in exceptional circumstances. In the Learned Judge’s view, with the several essential matters still remaining to be settled between the parties, the letter of intent did not constitute a binding contract at law but was only a record terms agreed by the parties as basis for a contract negotiation. As for the question of compensation for work done prior to the dispute, the Learned Judge held that a claim on a quantum meruit basis for the preliminary works carried out on the site was successful but was subject to a maximum limit of RM 300,000.

The Privy Council decision of SIOW WONG FATT V SUSUR ROTAN MINING LTD & ANOR [1967] 2 MLJ 118 spells out four conditions which must be satisfied to ground a quantum meruit claim:

  • must be lawful

  • must be done for another person

  • must not be intended to be done gratuitously

  • must be such that the other person enjoys the benefit of the act or the delivery. 

In other words, if you provide lawful services to a separate party, who either asked or accepted these services, and that party knows those services are not free, and he/she has enjoyed the benefit of those services provided, the conditions for a quantum meruit claim would be satisfied. 

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