Damages under Quantum Meruit in the context of Indian Contract Law PDF

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Damages under Quantum Meruit in the context of Indian Contract Law...

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DAMAGES UNDER QUANTUM MERUIT IN THE CONTEXT OF INDIAN CONTRACT LAW

I.

Introduction

The principle of Quantum Meruit is one of restitution. It is a Latin phrase and the literal meaning of the same is “what one has earned”. In the legal domain this principle most prominently features in the context of contractual law. Black Law Dictionary defines quantum meruit as “as much as one deserves.”1 Fundamentally, it is a legal action based on equitable restitution. 2 It ensures the compensation for the performance of the party. Therefore, the claim of quantum meruit alludes to the granting of an equitable recovery to a party. Such recovery if granted on the basis this principle is meted out as per the services rendered by the party and ensures that the party recovers/ receives what it ‘deserves’.

When inferring from common law practice, recoveries in quantum meruit can materialise in three circumstances: implied in fact contracts, implied in law contracts, and as an alternative remedy upon a breach of an express contract.3 In the context of Indian law, this principle finds its basis in section 70 of the Indian Contracts Act, 1872. This section entails the obligation of a person to compensate for the benefit he/she derives from the performance a non- gratuitous act by another party. This provision accords a wider stance than the principle of quantum meruit and admits a more liberal interpretation.4

1 Henry Campbell Black, Black's Law Dictionary, 6th ed, Pg. 1243, 1990. 2 Judy B. Sloan, Quantum Meruit: Residual Equity in Law, 42 DePaul L. Rev. 399, 1992. 3 Arthur Rosett, Contract Law and its application, University Casebook Series, 4th ed, Pg. 340-41, 1988. 4 Food Corporation of India and Others v. Vikas Majdoor Kamdar Sahkari Mandli Limited, 13 SCC 544, Para. 12, 2007.

II.

Quantum Meruit in India

The most recent interpretation of quantum meruit by the Supreme court (SC) was in Mahanagar Telephone Nigam Limited (MTNL) v. Tata Communications Limited (TCL) while differentiating between the claims in quantum meruit and the damages in breach of contract. 5 In the aforesaid case the contract was a purchase order between MTNL and TCL. which restricted liquidated damages to 12% of the purchase value in case of a breach. As TCL did not perform its obligations MTNL deducted certain amounts of money from TCL’s invoices. TCL filed a claim in the Telecom Disputes Settlement and Appellant Tribunal (TDSAT). MTNL defended its deductions stating that such sums are due under ‘ quantum meruit’. TDSAT passed an order in TCL’s favour, which lead to MTNL approaching the SC.

SC upheld TDSAT’s order. This decision was based on the existence of a contract between the two parties and the contract clearly laying out the remedy in case of breach. Owing to this, the contract was held to be governed by section 74 of the Contract Act. While relying on various judgements the SC dismissed the claim of quantum meruit, by stating that such a claim can only exist under section 70 when there is no explicit contractual relationship. Such an interpretation of the court thus strictly narrows down the basis upon which a quantum meruit claim can be made.

III.

Conclusion

This principle is one of equitable restitution encompassing the calculation of compensation on the basis of equity. The interpretation of the court grounds the principle in section 70 of the Indian contracts act which exists in Chapter V: Of certain relations resembling those created by contract. Thus, a claim cannot arise when there exists an unambiguous contractual relation between parties. This view may be inconsistent with common law 6, but a broader interpretation of the principle would ensue innumerable claims, and would revert the courts to functioning as courts of equity. A wider application of the principle would also lead to a greater reliance on the discretion of the court to determine a claim of the party. Thus in conclusion, although the origins 5 Mahanagar Telephone Nigam Limited v. Tata Communications Limited, 5 SCC 341, 2019. 6 Pratik Jain, Singh & Associates, Quantum Meruit, Mondaq, 14 January 2020.

of this principle is based on fair and reasonable compensation in the interest of equitable justice, it cannot be applied in the existence of unequivocal contracts....