GTL Hypotheticals #3
QUESTION - Can a builder who has repudiated a building contract, submit a quantum meruit claim for work done under the contract that exceeds the value of the repudiated contract?
ANSWER - Following the High Court decision in Mann v Paterson Constructions Pty Ltd  HCA 32, the short answer is no.
In this case, the builder had repudiated the contract and sought payment for work completed. The work completed included 42 variations that had been verbally agreed between the parties. The variations had therefore not been done in accordance with section 38 of the Domestic Building Contract Act 1995 (VIC) (DBCA) and the builder had no contractual right to payment for that work. The Court held that section 38 of the DBCA prohibits relief for variations not made in accordance with that section.
The High Court held that in relation to completed work that fell under the repudiated contract, the builder was not entitled to bring a quantum meruit claim, and was therefore limited to relief in the form of damages for breach of contract. In relation to the work completed under the variations (where there was no contractual right to payment), the Court held that the builder could bring a quantum meruit claim, however, the claim was to be limited to the value of the contract.
This decision has changed the availability of the quantum meruit claim, but will undoubtedly encourage honesty between contracting parties. It will no longer be possible for a party to enter into a bad bargain only to later repudiate the contract and obtain payment for an amount higher than initially agreed.
Article written by Jessica Hutchinson | Solicitor