Service providers and recipients alike should understand the nuances of contract law, especially regarding unspoken agreements and remedies for a breach. Without an official contract, a quasi-contract forms between two parties based on mutual understanding. If unfair enrichment occurs on the recipient’s side, the service provider may seek a remedy through a quantum meruit, unjust enrichment, or promissory estoppel.
These three remedies are for quasi-contractual agreements where the service provider feels the recipient unjustly benefits without compensation. Understanding the difference between the three is crucial, and both business owners and their customers should be aware of why an official contract simplifies the entire process. Read below to understand the basics of quantum meruit, unjust enrichment, and promissory estoppel.
Quantum Meruit
Claiming What’s Earned in Texas: The Recovery Process
To recover, one party must show that the recipient received the services knowing they needed to pay for them but didn’t and was therefore unjustly enriched. It is appropriate when two parties have discussed or attempted to form a contractual relationship. Perhaps one of the parties believed a contract had been formed, and the other thought that a few details needed to be worked out. In this situation, if the recipient has accepted the benefits of the other party’s services, then one can say there is an implied contract leading to a quantum meruit recovery.
Assessing Value in Quantum Meruit Claims
The idea of fair market pricing comes into play because when a formal contract is not formed, there is likely not a contract price that can be determined by agreement from the parties. Under quantum meruit, courts define the measure of damages as “the reasonable value of labor performed and the market value of the materials furnished.” The Texas Supreme Court recognizes Quantum Meruit as a substitute for a contract claim when there is no contract covering the services performed or materials provided.
Unjust Enrichment
The Basis of Unjust Enrichment Claims
Unjust enrichment means that one cannot use services without paying for them. Unlike quantum meruit, an agreement between the two parties is not required to recover for unjust enrichment. Quantum meruit comes from the parties’ expectations, but unjust enrichment arises from society’s interest in preventing the injustice of a person receiving a benefit conferred without paying for it.
Seeking Redress for Unjust Enrichment
To recover an unjust enrichment claim, one party must show the lack of remedy at law, including the benefit received, the defendant’s appreciation of the benefits, and acceptance of the benefit without compensation. Typically, the provider has performed while the recipient has not entered a contractual agreement. It is not the same as a gift given without expectations of payment. In some cases, the court may consider what the defendant received due to the unjust enrichment.
Promissory Estoppel
What is Promissory Estoppel?
Promissory estoppel is the remedy available when circumstances occur that would otherwise fall short of a contract but for which justice demands restitution. A party may recover when they rely on a promise to their detriment, often at their expense. This concept is often taught in law school as a fundamental principle of contract law.
Legal Implications
Promissory estoppel creates legal obligations that, though never assumed by the parties explicitly, have similar binding effects as an actual contract. For example, if Mary promises John that she will finance his “side hustle” if he devotes full-time to it, and John quits his day job to run the business, but Mary refuses to honor her promise, John has a claim for promissory estoppel against Mary. The court may assign reliance damages or expectation damages if a party breaches the obligation created by a promise made and relied upon by another. Even without formal creation, the legal principle of promissory estoppel is enforceable in equity. It keeps people from breaking their promises and helps the party who suffered from the broken promise recover.
Legal Support for Contractual Commitments
In the complex world of contract law, understanding quasi-contractual remedies like quantum meruit, unjust enrichment, and promissory estoppel is crucial for service providers and recipients. These legal principles ensure that fairness prevails even without formal agreements, offering a safety net when one party provides a benefit without just compensation. Whether you are safeguarding your business against potential disputes or seeking rightful compensation for services rendered, it’s wise to consult with skilled attorneys who specialize in these areas.
At Ritter Spencer Cheng PLLC, our experienced business lawyers are ready to provide you with robust legal advice and strategic guidance to navigate these challenges effectively. Contact us today to secure your business interests and enforce the promises made to you, ensuring that justice is served in every transaction.
Author: David Ritter Managing Member of Ritter Spencer Cheng PLLC
