Express contracts are easy enough to understand. An express contract is a legally enforceable agreement formed by an exchange of promises, the terms of which are declared, either orally or in writing, at the time the agreement is formed. A mutual meeting of the minds is required, and the agreement must be supported by consideration. If I promise to pay you $10 to wash my car, and you accept my offer and proceed to wash my car, we’ve formed a contract and I am legally obligated to fork over that $10. But what if you just decided on your own to wash my car without discussing it with me first? Or maybe I ask you to wash my car and you accept, but we never discuss price? In situations like these, I may still be required to pay you a fair price for the service you provided, even though we never actually formed a contract. The legal concepts involved are known as unjust enrichment and quantum meruit. Let’s review what these related-but-distinct terms mean.
Unjust Enrichment / Quasi-Contract / Contract Implied In Law
The Latin prefix “quasi” means “as if” or “as though.” So you can think of a quasi-contract as being something just like a contract, and treated as if it were a contract, though not an actual contract. Quasi-contracts are deemed to exist to prevent cases of unjust enrichment. Unjust enrichment occurs when (a) a plaintiff has conferred a benefit on the defendant; (b) with a reasonable expectation of compensation; (c) the defendant was aware (or should have been) that the plaintiff conferred a benefit with the expectation of payment; and (d) the defendant accepted or retained the benefit without paying anything for it. Unjust enrichment usually involves a situation where someone provides a service to another without being asked to do so. If it would be unfair to allow the other person to enjoy the benefit of this service without paying for it, the law will allow the plaintiff to recover damages from the defendant even in the absence of any contract. It’s “as if” there were a contract, so a contract is said to be “implied in law,” though it is not an actual contract. Plaintiffs can recover the value of the benefit realized and retained by the defendant (which may or may not be the same as the value of the services provided).
Quantum Meruit / Contract Implied in Fact
If a defendant did request the plaintiff’s services and services were in fact provided, a contract will be implied even if not made expressly. A contract implied in fact (i.e., an implied contract) is an actual contract–just one that hasn’t been made expressly, in writing or verbally. But we can tell from the parties’ course of conduct or other circumstances that an agreement has been reached between the parties on at least some material terms. “Quantum meruit” is Latin for “as much as he has deserved.” An implied contract will be found to exist “[w]here service is performed by one, at the instance and request of another, and…nothing is said between the parties as to compensation for such service.” (See Mongold v. Woods, 278 Va. 196, 203 (2009)). In such a situation, the person providing the service can recover in “quantum meruit” an amount of money representing the reasonable value of the work performed (less any compensation actually received for that work). The law considers this to be a contractual arrangement, even though price terms were not discussed. Price terms are implied.
Drawing the proper distinction between these two often-confused legal concepts can be vitally important, as evidenced by the Virginia Supreme Court’s decision last week in T. Musgrove Construction Co. v. Young. Tommy Musgrove, owner of a construction company bearing his name, loaned a company dump truck to his son so that he could harvest some timber and earn some money selling the logs. After the son and a friend cut the logs and loaded them in the truck, they had an accident. The truck rolled over on its side and the logs spilled out. There was only one company in the area with equipment capable of cleaning up the mess: FoxFire Towing, owned by Craig Young. So FoxFire showed up and did the work that needed to be done (e.g., straightening the dump truck, cleaning up the logs, removing contaminated soil and disposing of it, etc.) FoxFire sent Musgrove a bill for $12,380.11. Musgrove refused to pay, so FoxFire sued for the amount of the bill plus
FoxFire argued the $57,000 was appropriate on a theory of quantum meruit. Musgrove argued that because it had not requested FoxFire to perform any services, the relevant measuring stick should be that of unjust enrichment and not quantum meruit. And because it had not enjoyed any benefit worth $57,000, the verdict should be reduced. The court agreed with Musgrove.
Musgrove received a benefit from FoxFire because someone had to right and remove the truck from the roadway. So FoxFire was entitled to recover its reasonable charges for work expended in bringing the truck upright and towing it away. The storage charges, however, were a different story. The dump truck only had a salvage value of $2000, yet FoxFire claimed entitlement to roughly $44,000 in storage fees. The court looked to Section 21 of the Restatement (Third) of Restitution and Unjust Enrichment (2011) for guidance. It states:
(1) A person who takes effective action to protect another’s property from threatened harm is entitled to restitution from the other as necessary to prevent unjust enrichment, if the circumstances justify the decision to intervene without request. Unrequested intervention is justified only when it is reasonable to assume the owner would wish the action performed;
(2) Unjust enrichment under this section is measured by the loss avoided or by a reasonable charge for the services provided, whichever is less.
Here, the loss avoided by the storage of the dump truck was the value of the truck, which was just $2000. Musgrove was not unjustly enriched by the acceptance of any storage services valued beyond that amount. Therefore, the court held, FoxFire’s recovery for storage fees was limited to $2000.
Similarly, Musgrove did not benefit from the clean-up of the logs and accident scene, and could therefore not be held liable for the value of such services on an unjust enrichment theory or otherwise. At the time of the accident, the truck was not being used for company business. For that reason, cleaning up the accident scene was not Musgrove’s responsibility. As Musgrove received no benefit from FoxFire’s clean-up work, it was not unjustly enriched by these services.
The court sent the case back to the trial court with instructions that it measure damages according to a theory of unjust enrichment and not quantum meruit, and that it limit damages to the value of the benefit enjoyed by Musgrove.