Business contracts exist to protect the rights of the parties involved, especially helpful if a business venture doesn’t go as planned. At times, however, a partnership exists without a formal contract. If all goes well, this informal arrangement creates no issue, but if things go poorly, a party who provides goods or services without a contract still has legal recourse for repayment. The option available to the plaintiff in that situation is known as quantum meruit, a Latin phrase which means “the amount earned” and allows the plaintiff to recover damages equal to the value of the materials and services provided, including attorney fees and interest, if applicable. The focus of quantum meruit is to ensure equity in a case where one party has been “unjustly enriched” by another party who has provided services and/or materials, thus offering some assurance of equitable repayment. Corbin on Contracts §1122 (1964).
In order for a plaintiff to claim quantum meruit, the following elements must exist: the plaintiff has provided valuable materials and services; they were provided specifically for the defendant, who accepted those services and materials; the plaintiff communicated an expectation of compensation for providing the services and materials.
Quantum meruit was a central focus in the case of Truly v. Austin et. al., in which Jack Truly brought action against the defendants, James Austin and Gerald Clark. Mr. Austin purchased property in Jasper, Texas, which he, Gerald Clark, and Jack Truly planned to develop into a shopping center. They signed a contract stating that Austin would sell the land to the others, Austin and Clark would “arrange financing of the construction and development,” and Truly would supervise construction for a salary of $2000 per month for two years. The contract also stipulated the ownership interest: 30% each to Austin and Clark, and 40% to Truly.
Later, Austin and Clark ended their agreement with Truly because he would not assume personal liability for the financing of the joint venture. Truly then sued Austin and Clark for breach of contract and for quantum meruit, eventually dropping the complaint for breach of contract and moving forward with quantum meruit as his only claim. The jury initially agreed with Truly, awarding him $215,000 in damages and $70,000 in attorney’s fees.
When Austin and Clark appealed the verdict, however, the court of appeals reversed the judgement. Because there was a signed contract, Truly was not entitled to recover damages or attorney’s fees under the general rule of quantum meruit. Black Lake Pipeline v. Union Construction Co., Inc., 538 S.W.2d 80, 86 (Tex.1976); Woodard v. Southwest States, Inc., 384 S.W.2d 674, 675 (Tex.1964). In addition, by signing the contract, Truly agreed to the same obligations and interests as his partners, losses as well as profits. Tex. Rev. Civ. Stat. Ann. art. 6132b, § 15 (Vernon 1970). The court also noted that the defendants were not “unjustly enriched” by Truly. In fact, he provided services for a venture in which he held a large interest. He also breached their contract, which ultimately led to the failure of the project.
As a result of these factors, the Beaumont Court of Appeals overruled the trial court. When the case was next brought before the Texas Supreme Court, the court affirmed the appellate court’s decision, ruling against Truly.
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