Contract is King—High Court restricts availability of quantum meruit

home owner cancels contract on builder

In Mann v Paterson Constructions Pty Ltd [2019] HCA 32 the High Court clarified the availability of the restitutionary remedy of ’quantum meruit’ to a builder in the specific circumstances where the builder terminates the contract following repudiatory behaviour of a homeowner. A literal translation of ‘quantum meruit’ is ’the amount he deserves’. It can be used to restore the value of the goods and services supplied by a builder which otherwise may be unfairly gained by a home owner.

It had long been established that a builder, when terminating a contract for the owner’s breach or accepting the owner’s repudiatory conduct, could elect to claim his loss either as damages for breach of contract or as quantum meruit. In practice, a builder may have elected to claim on quantum meruit because he had underpriced the job and his loss of profits, as part of his damages, was minimal.

A practical result of the election opportunity was that the contract did not act as a ceiling on the builder’s recovery and allowed him to be placed in a more favourable position than he could have achieved under the contract. The High Court has now held that a builder can claim on a quantum meruit but only where he had no accrued contractual right to payment. Where there was a contract in place the builder was limited to claiming his contractual entitlements

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Clare Peacock is an experienced construction lawyer working on Sydney’s Northern Beaches. Clare provides practical, cost-effective building approval advice to property owners, builders and strata managers. Services include residential building disputesbody corporate issues and strata building problems.

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