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Claims for variations in building and construction

Tuesday, November 1, 2016

In the construction industry and in all industries generally, when payment for invoices becomes due and owing, there are essentially two ways in which a claim for payment can be made. The first is under the contract between the parties and the second is under the legal principle of quantum meruit.
 
A quantum meruit claim is an action for payment based on what is the reasonable value of services performed. This type of claim can arise in certain circumstances such as where there is a contract but no price has been fixed by that contract; where there is a quasi-contract, such as work carried out prior to contractual terms being settled; work done outside the scope of a contract; and work under a void, unenforceable, or terminated contract. This type of claim is particularly relevant in relation to variations to contracts.
 
It is common, in commercial situations, for contracts to contain specific requirements for how a variation can be made. However, given commercial realities, it can be difficult to strictly adhere to such requirements. In a situation where a variation to a contract has been performed, but perhaps the procedure for agreeing to that variation has not been followed, then a claim for quantum meruit may exist if payment for the variation work is later refused based on non-compliance with the variation procedure. A claim for a quantum meruit amount will be based on the work you have done and what is considered a reasonable and fair price for that work.
 
This has been confirmed in the recent case of Miccon Hire Pty Ltd (in liquidation) v Birla Mt Gordon Pty Ltd [2013] QSC (31 May 2013). Here, the Supreme Court Chief Justice acknowledged that a claim for quantum meruit existed where the variation work was sought by the defendant, the defendant knew that plaintiff was carrying on the work, the defendant accepted the benefit of the variation and the defendant monitored the progress of the variation work, despite the procedure for undertaking a variation not being followed. This is based on the well-established contract law principles of estoppel, waiver and unjust enrichment.
 
A successful quantum meruit claim requires proof of three elements: Firstly, the defendant must have received a benefit from the work done; secondly, expenses have been incurred by the plaintiff to provide the benefit and thirdly; it would be unjust for the defendant to retain the benefit without paying the amount that is claimed.
 
A quantum meruit claim recognises that where no price has been agreed to, there will generally be a term implied into the contract that a reasonable price is to be paid. This may be determined by using industry standards.
Liability limited by a scheme approved under Professional Standards Legislation.

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