06 November 2025

Quantum meruit to the rescue? Maybe, but don’t count on it

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In the building and construction industry, certainty in contracts is the foundation for successful projects. But what happens when work is done without a formal contract, or outside the agreed scope, and disagreement ensues?

In that case, quantum meruit may come into play. Quantum meruit, which in Latin means, “as much as is deserved”, is a principle that allows you or someone else to claim reasonable payment for services or work provided. This principle is particularly significant for government agencies due to several factors:

Budget constraints: Government projects often have fixed budgets, making it difficult to accommodate unexpected quantum meruit claims and agencies cannot often pay beyond allocated funds
Transparency requirements: Payments under quantum meruit claims must be justified, reasonable and transparent. If work has been performed to the benefit of the government agency, it must be well documented
Limited discretion: Officials in government agencies often lack authority to approve extra work retrospectively.

Quantum meruit claims commonly arise in situations where:

A contract has been terminated before completion
Additional work was carried out without formal approval of a variation
Services were provided under an informal or incomplete agreement
The government agency received and benefited from the work
The contract is void for any reason or there was no contract
There was an implied obligation to pay for the services rendered.

The three pillars of contract formation

A valid contract in NSW is built on three foundational elements:

Offer: An offer is a clear proposal to enter into an agreement
Acceptance: The unconditional agreement to the terms of the offer
Consideration: Something of value exchanged between the parties, which is essential for a contract to be enforceable.

Additionally, the intention to create legal relations and the capacity to contract are critical components that ensure the contract’s validity.

The three pillars have been considered in the following case law:

The NSW Court of Appeal in Creative Academy Group Pty Ltd v White Pointer Investments Pty Ltd [2024] NSWCA 133 was required to examine whether a new promise constituted valid consideration. The Court held that a promise to perform an existing duty does not amount to consideration unless it is part of a bona fide compromise of a disputed claim.
In Radovanovic v Stekovic [2024] NSWCA 129, the Court clarified that acceptance of a Calderbank offer could form a binding contract only if there was a clear intention to be bound immediately.

Express vs implied terms in contracts

Contracts consist of express terms, which are clearly articulated in writing, or even orally. Implied terms, on the other hand, are not written but are nonetheless understood to be part of the contract to ensure fairness or functionality.

Where implied terms are breached and a court becomes involved, it may act on the principle of quantum meruit.

Quantum meruit is a claim for reasonable payment for services when no formal contract exists, or when work is performed outside the contract’s scope. It acts to prevent unjust enrichment and allows a party to claim reasonable payment for services rendered.

It is underpinned by the deeper principle of an implied duty of good faith in contractual performance, something NSW courts have long recognised. Key cases include Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 and Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187.

Both cases affirmed that the scope and application of quantum meruit depend on the nature of the contract and the parties’ conduct. They highlight the judiciary’s balanced approach to ensuring fairness without undermining the parties’ autonomy and emphasise that quantum meruit claims in NSW are subject to legal boundaries.

Quantum meruit: not a silver bullet

The High Court case of Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 illustrated that quantum meruit is based on unjust enrichment rather than an implied contract. This pivotal case allowed recovery despite the absence of a written contract for building work required by statute.

A more recent decision in Mann v Paterson Constructions Pty Ltd [2019] HCA 32 narrowed the circumstances under which quantum meruit can be claimed, reinforcing the importance of respecting the original contractual bargain. The Court held that quantum meruit is not available where a contractual right to payment has already accrued, and that any restitutionary claim must be capped at the contract price.

Judicial reluctance to intervene

NSW courts generally avoid interfering in commercial contracts, upholding the principle of freedom of contract. This is grounded in the view that parties to a commercial agreement are of equal bargaining power and should be free to negotiate terms. Intervention is reserved for exceptional cases involving unconscionable conduct, penalty clauses, or misrepresentation. The Contracts Review Act 1980 (NSW) provides a statutory framework for intervention, but courts apply it sparingly in commercial contexts.

Key takeaways

Certainty is king: Despite the existence of quantum meruit, clear, enforceable contracts remain essential for allocating risk and ensuring payment. NSW contract law relies on the principle of certainty in contractual bargaining.
Quantum meruit is a last resort: This remedy is only available when no enforceable contract exists, or work is performed outside the contract’s scope. The claim must be limited to the fair value of the work done without an accrued right and cannot exceed the contract price.
Courts favour party autonomy: NSW courts rarely interfere in commercial contracts except in cases of ambiguity, unfairness, or illegality. Contracts are legally binding agreements with clear, mutually agreed terms and the courts will only intervene to prevent unjust enrichment, allowing parties to claim reasonable payment for services rendered.
Proper drafting prevents disputes: Good contract management is the best way to avoid uncertain claims and costly litigation. Contracts provide a structural framework that allows parties to allocate risks, define obligations, and plan performance.