If parties fail to achieve a legally binding contract, there is always, of course, the fall-back position that the party carrying out requested work is entitled to be paid a reasonable sum for it. Or is it?
A company providing corporate finance and mergers and acquisitions advice claimed payment for services provided to a private equity firm in connection with the acquisition of a company. It claimed there was an oral agreement or, alternatively, that it was entitled to be paid on a quantum meruit basis, on the grounds of unjust enrichment, for valuable services provided.
The court ruled that there was no oral contract, noting that it is not uncommon in the courts for witnesses to deceive themselves in essentially honest, but nonetheless false, recollections. In determining the truth it is more helpful to focus on objective indicia, in the documents and in the inherent probabilities, than to rely on evidence as to a witness's memory, especially when the events in question took place a considerable time ago. Which left the quantum meruit claim. Was payment of a reasonable sum for the services the default position?
The court, in dismissing the claim, said that, in the absence of a contract, there is no general right to payment for requested services. From the case law it derived a number of propositions, in summary that:
- the modern approach is to determine whether, in the circumstances, the law should impose on the defendant an obligation to pay an amount which the claimant deserved to be paid;
- generally speaking, a person seeking to enter into a contract cannot claim the cost of estimating what it will cost them or deciding a price, the cost of bidding for the contract or of showing the other party their capability or skills;
- the court is likely to impose such an obligation where the defendant has received an incontrovertible benefit (e.g. an immediate financial gain or saving of expense) as a result of the claimant's services; or where the defendant has requested the claimant to provide services or accepted them (having the ability to refuse them) when offered, knowing that the services were not intended to be free;
- the court may not regard it as just to impose an obligation to pay if the claimant took the risk that they would only be reimbursed for their expenditure if there was a concluded contract; or if the court concludes that, in all the circumstances the risk should fall on the claimant;
- the court may impose such an obligation if the defendant who has received the benefit has behaved unconscionably in declining to pay for it.