Is There an Entitlement to Reimbursement Without a Contract under Quantum Meruit?

Is There an Entitlement to Reimbursement Without a Contract under Quantum Meruit?

A claim for quantum meruit in restitution may arise in the following situations:

  1. Where the parties proceed on the mistaken basis that there is an enforceable contract, but there is no contract.
  2. One party requests services from the other which are not governed by a contract.
  3. Where the contract is frustrated.
  4. Where before completion the contractor accepts a repudiation by the employer as terminating the contract. The contractor can elect to sue for damages for breach of contract or quantum meruit in restitution for the work performed.

In Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] Lord Steyn identified four questions which arose in relation to any claim in restitution:

  1. Had the defendant benefited or been enriched?
  2. Was the enrichment at the expense of the claimant?
  3. Was the enrichment unjust?
  4. Were there any defences?

All the circumstances need to be considered. In Mowlem PLC v PHI Group Limited [2004] HH Judge Gilliland QC considered on appeal from an arbitrator an alternative claim for payment on restitutionary principles. The arbitrator found that the parties had acted together for their mutual benefit. It was held that if the supply of material benefited Mowlem because it meant it would not be at risk of being in breach of its own contract, that was a material factor to take into account when concluding that no entitlement to restitutionary benefit arose in the circumstances.

If there has been a total failure of consideration in a contract the injured part can then make a claim in restitution. So, for instance, if the subcontractor has not performed at all, the contractor can claim for the return of monies paid. If the subcontractor has been overpaid and has failed to complete, the contractor can recover the overpayments even if it has managed to have the work completed without, in fact, incurring any loss despite the overpayments.

Estoppel by convention can operate to prevent a claim to restitution of payment by mistake. If the money is spent in good faith, in reliance on the representation that there was an entitlement to it, then the order for repayment will create the detriment sufficient to found the estoppel.

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