§15.6 Extraordinary Claims

• Jurisdiction: Washington

§15.6 EXTRAORDINARY CLAIMS

This section discusses extraordinary claims—those for recovery of some loss or cost not addressed by the contract.

(1) Quantum meruit

Contractors at times will be required by owners to perform work that is not expressly covered by the scope of the contract. As a result, disputes often arise as to whether the work was inherently within the contemplation of the contract. To recover added costs and expenses not within contemplation of the contract, contractors may assert a claim under the theory of quantum meruit.

Quantum meruit is an equitable theory, sometimes referred to as the doctrine of unjust enrichment because it ensures contractors can recoup the costs associated with performing out-of-scope work. Young v. Young, 164 Wn.2d 477, 484, 191 P.3d 1258 (2008) ("Unjust enrichment is the method of recovery for the value of the benefit retained absent any contractual relationship because notions of fairness and justice require it.") The phrase quantum meruit literally translates to "as much as he has deserved." Black's Law Dictionary (10th ed. 2014). It is therefore important to determine exactly where the scope of the contract ends and where additional work begins to determine exactly what damages may be claimed under a quantum meruit theory. Sutter Home Winery, Inc. v. Vintage Selections, Ltd., 971 F.2d 401, 408-09 (9th Cir. 1992); see also Swanson v. Levy, 509 F.2d 859, 861 (9th Cir. 1975) (action under

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theory of implied contract precluded by existence of express contract governing the particular issue).

The key to quantum meruit recovery is that a contractor may recover damages in excess of its contract price under the theory. Boomer v. Muir, 24 P.2d 570 (Cal. App. 1933). That is because, in contrast to the preceding methods of calculating damages, the quantum meruit method measures the value of the benefit conferred on the owner rather than the costs incurred by the contractor. Young, 164 Wn.2d at 484.

Both federal and Washington courts favor contractual obligations over equitable doctrines. See Chandler v. Wash. Toll Bridge Auth., 17 Wn.2d 591, 605,137 P.2d 97 (1943) ("A party of a valid express contract is bound by the provisions of that contract, and may not disregard the same and bring action on an implied contract relating to the same matter, in contravention of the express contract"); MacDonald u. Hayner, 43 Wn. App. 81, 85-86, 715 P.2d 519 (1986); see also Rogers v. Am. President Lines, Ltd., 291 F.2d 740, 742 (9th Cir. 1961) ("An action does not lie in an implied contract where there exists between the parties a valid express contract which covers the same subject matter."); United States ex rel. Westinghouse Elec. Supply Co. v. Ahearn, 231 F.2d 353, 356 (9th Cir. 1955) ("There cannot be an implied contract either in law or in fact contrary in terms to a controlling express contract."); Klebe v. United States, 263 U.S. 188, 192, 44 S. Ct. 58, 68 L. Ed. 244 (1923) ("A contract implied in fact is one inferred from the circumstances or acts of the parties; but an express contract speaks for itself and leaves no place for implications."); Seattle Prof'l Eng'g Employees Ass'n v. Boeing Co., 139 Wn.2d 824, 838-39, 991 P.2d 1126 (2000) (unjust enrichment is available when the party conferring the benefit has no remedy at law). Therefore, quantum meruit generally is limited solely to recovery that is outside the contemplation of a contract. V.C. Edwards Contracting Co. v. Port of Tacoma, 83 Wn.2d 7, 13, 514 P.2d 1381 (1973). In claiming damages under the quantum meruit theory, "[t]he critical issue is whether the contractor should have discovered or anticipated the changed condition." James F. Nagle et al., Washington Building Contracts and Construction Law 18-15 n.16 (1994). In addition, "when an express contract is silent as to price, the law will invoke the standard of reasonableness and permit recovery of the 'fair value' of the additional work performed." APAC Car., Inc. v. Town of Allendale, 41 F.3d 157, 165 (4th Cir. 1994).

In a majority of jurisdictions, quantum meruit recovery is limited to situations in which the contractor has dutifully performed or substantially performed its obligations under the contract. PDM Mech.

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Contractors, Inc. v. Suffolk Constr. Co., 35 Mass. App. Ct. 228,618 N.E.2d 72, review denied, 416 Mass. 1107 (1993). At a minimum, the contractor must have not breached the contract and must have substantially performed to advance a quantum meruit claim. Schwartzkopf, Calculating Construction Damages 23 n.2.

Several jurisdictions require the satisfaction of certain requirements before advancing a quantum meruit theory. For example, the Second Circuit has adopted a four-part test that must be satisfied before a quantum meruit claim may be recovered on

(1)	the performance of services in good faith;
(2)	the acceptance of the services by the person to whom they are rendered;
(3)	an expectation of compensation therefor; and
(4)	the reasonable value of the services.

Revson v. Cinque & Cinque, P.C., 221 F.3d 59, 69 (2d Cir. 2000).

A prime example of quantum meruit recovery in federal court is APAC Carolina, where a contractor was hired to construct a sewage treatment facility. 41 F.3d at 159. The contractor and a subcontractor came to an oral understanding regarding additional work as a result of inaccuracies and defects in the design documents, but the parties did not agree on compensation for the additional work. A dispute regarding the value of the additional work arose, and the subcontractor filed suit seeking quantum meruit damages, which was passed on to the owner by the prime contractor. The court allowed the quantum meruit claim because the oral agreement did not set the material term of price and did not constitute a binding contract. As such, the court awarded the "fair value" of the work performed by the subcontractor as established through an actual cost analysis.

Likewise, the court allowed recovery under a quantum meruit theory for a subcontractor that was terminated early in Franklin Pavkov Construction Co. v. Ultra Roof, Inc., 51 F.Supp.2d 204, 220 (N.D.N.Y. 1999). In that case, the prime contractor, Pavkov, hired Ultra Roof to retrofit an Army facility with a new roof. Id. at 220. However, a dispute regarding timely performance and timely payments arose, and Pavkov terminated Ultra Roof before the contract had been completed. The court determined that Ultra Roof was entitled to assert a quantum meruit claim based on Pavkov's failure to pay for work performed. The court measured the damages as the actual costs incurred by Ultra Roof in its performance, minus the amounts previously paid to it under the contract by Pavkov. The court refused to reduce the damages amount

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by the amount required to hire another subcontractor to complete because of Pavkov's failure to pay Ultra Roof, and refused to award profit to Ultra Roof due to its untimely performance.

However, the court refused to allow a quantum meruit claim because the claims sought to be advanced were expressly part of the contract scope, in American Towers Owners Ass'n v. CCI Mech., Inc., 930 P.2d 1182 (Utah 1996), abrogated on other grounds by Davencourt at Pilgrims Landing Homeowners Ass'n v. Davencourt at Pilgrims Landing LC, 221 P.3d 234 (Utah 2009). In American Towers, a contractor was hired to perform mechanical and plumbing work for a condominium complex. Id. The contractor performed the work, but it was deficient, so the owner brought a quantum meruit claim seeking damages. The court refused to allow the quantum meruit claim because the contract between the parties provided an adequate remedy at law, that is, a breach of contract claim.

Specific to Washington state, the courts have approved the application of quantum meruit damages to situations in which "substantial changes occur which are not covered by the contract and were not within the contemplation of the parties. ..."Bignold v. King County, 65 Wn.2d 817, 826, 399 P.2d 611 (1965). Specifically, whether the changed condition or damages were contemplated by the contract is the critical question. V.C. Edwards Contracting, 83 Wn.2d at 13. This analysis is done as a mixed question of law and fact. Hensel Phelps Constr. Co. v. King County, 57 Wn. App. 170, 175, 787 P.2d 58 (1990). When analyzing whether the additional work is beyond the scope of the contract, only the nature of the work should be analyzed. Hensel Phelps Constr. Co., 57 Wn. App. at 182-83. Even if a large magnitude change occurs, quantum meruit recovery will be denied if those changes were contemplated by the contract. Id. at 181-82. Additionally, profit is allowable when determining recovery under quantum meruit, as long as there are no circumstances that would bar its recovery. V.C. Edwards Contracting, 83 Wn.2d at 13.

Illustrating its application, the court in Bignold determined that quantum meruit damages were appropriate when a contractor encountered difficult site conditions that materially changed its required performance. 65 Wn.2d at 826. In that case, a contractor was hired to perform roadway construction using excavated materials from one spot as fill for another. Id at 819. The excavated material was unsuitable to be used as fill on the project, requiring additional work for the contractor. Id. at 821. The court determined that the contractor could not foresee the unsuitable site conditions and that additional work for such site

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conditions was not covered by the scope of the contract. Id. at 822. As such, the court allowed recovery for the additional work, along with profits on such work. Id. at 827.

Conversely, the court in Hensel Phelps Construction denied quantum meruit recovery to a contractor that experienced enormous labor overruns due to accelerations and trade stacking. 57 Wn. App. at 172...