Quantum Meruit is an exception to the general rules laid down under The Contract Act, which provides that a party should be reasonably compensated for the work done by it. Section 75 of the Contract Act deals with the doctrine of Quantum Meruit. As per the doctrine, when a person performs work pursuant to a contract, but the opposite party revokes the same, then the party who performed the work can demand compensation for the same. There may be instances where a party has performed work in addition to the work stipulated in the contract, if the same was on the instructions of the opposite party and was not gratuitous, even though no price is fixed for the same then also the party performing the work is entitled to reasonable compensation.
Princlple Laid Down by Indian Court for claiming quantum Meruit
Alopi Parshad & Son’s Vs. Union of India
In this matter, it was held that Quantum Meruit is a valid compensation granted on the implication of a contract to reimburse, and assuming cannot replace an explicit condition governing the relationship between the parties under the contract that such condition isn’t sensible. When work is completed following the terms of the contract, if it fixed reimbursement in accordance, quantum meruit restitution claim doesn’t lie.
Puran Lal Sah vs State of UP
The Hon’ble Supreme Court had laid down the following principle :
a. firstly quantum meruit claims cannot be availed by the party who breaks the contracteven if they partially performed part of their obligation
b. Secondly the court made the distintion between quantum meruit and claim fordamages: a quantum meruit puts the plaintiff in position as if the contract never tookplace whereas, a claim for damages puts the party in position as if the contract wassuccessfully executed.
Other relevant rulings of various Court of India and other countries-
Madras High Court in Dr. S. Irulappan v. The Government Of Tamil Nadu(2022), where the court applied the principle of quantum merit for awarding remuneration and retirement benefits for petitioners who worked until retirement that is 60 years instead of 58 years.[i] The court followed the observation laid down in famous case Craven Ellis v. Cannons Ltd.[ii] Ellis filed a suit for remuneration for the work he performed while he was appointed as Managing Director whose appointment was later held void. Court taking into consideration the principle of quantum meruit held that since Ellis had rendered his services with no gratuitous intention, he shall be entitled to reasonable remuneration.
In 2019 the Hob’ble Supreme court in Mahanagar Telephone Nigam Limited (MTNL) v. Tata Communications Limited (TCL), [iii] differentiated the claims in a suit for damages and inquantum meruit. The contract between the parties restricted damages to “12% of purchase value.” TCL had failed to perform its obligations and MTNL made deductions from TCL’s invoices. MTNL contented that the deductions were based on quantum meruit. Hon’ble Supreme court held that the contract clearly mentions the amount to be paid for breach of the contract and it is to be governed by section 74 of the Act and not by the principle of quantum meruit.
Conclusion:
Quantum meruit is an equitable remedy provided under the Indian Contract Act. Incatena of judgements courts have observed that when a contract is silent about the price for work/service rendered, compensation shall be determined based on the principle of quantum meruit. But if the price is fixed in the contract, then the principle of quantum meruit will not apply and it shall be dealt with under sections 73 and 74 of the Act. Indian courts have interpreted this principle in a strict sense. Courts provide that a party should be reasonably compensated for the work performed by them andno one should be deprived from the compensation for the work performed by them.
-Written by Varun Ahuja, Partner, Ahuja Law Offices, New Delhi