Here at the PAID blog we write a lot about how unpaid subcontractors can get paid by filing a mechanics lien because we think a mechanics lien is the best tool for getting paid. Nevertheless, there are also other avenues unpaid parties can take, to recover payment. Two other causes of action unpaid subs can utilize are quantum meruit and unjust enrichment. However, when an express contract exists, can unpaid subcontractors in Virginia still get paid under quantum meruit and unjust enrichment in light of a recent Supreme Court decision in that state?
What is Quantum Meruit?
In Latin, quantum meruit literally means “respect earned.” Legal scholars define the term as “as much as he has deserved.”
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Whatever your choice of translation, a lawsuit that alleges quantum meruit is essentially asking the court to award damages based on the value of the work performed.
a lawsuit that alleges quantum meruit is essentially asking the court to award damages based on the value of the work performed
For example, let’s say a property owner enters into an agreement with a carpenter to build a deck on the owner’s backyard. Unfortunately, the owner and the carpenter never specify how much money the carpenter should be paid upon successfully completing the deck. What happens when the property owner refuses to pay the carpenter at all, or if the two parties disagree on how much the carpenter should be paid?
The carpenter may sue the property owner under a theory of quantum meruit. Essentially, the carpenter would be asking the court to assign a dollar value that the carpenter should receive based on the work performed. When assigning damages based on quantum meruit, courts may look to the market value of the work performed, what other carpenters or construction experts believe the work is worth, or what the two parties may have intended the contract price to be.
What is “Unjust Enrichment”?
Unjust enrichment is another equitable form of relief that is somewhat similar – but different from – quantum meruit. Though I’m sure some law professors would disagree with my oversimplification of the distinction, the basic difference between quantum meruit and unjust enrichment is that in unjust enrichment there may not have ever been any agreement to begin with, where as with quantum meruit, there was an agreement but the agreement never specified a price.
Using the carpenter and deck example above, perhaps the property owner in an unjust enrichment example is actually a condominium owner who belongs to a ownership association. Without necessarily asking permission of each individual owner, the ownership association decides to hire a carpenter who will build a deck on the back of each condominium in the property. Even though the carpenter and the individual condo owner never reached an agreement, the carpenter may be able to sue the owner to get paid for the work the carpenter performed because building a deck is a situation in which one would “expect compensation in return,” and the property owner gained something from the work..
Even without an agreement, courts may force the owner to pay the subcontractor under a theory of unjust enrichment.
Even without an agreement, courts may force the owner to pay the carpenter under a theory of unjust enrichment. Essentially, the owner has received the “enrichment” of a deck without paying anything in return. Like quantum meruit suits, courts will look to the market value of comparable decks, evidence from construction experts, and the intent of the parties when assigning damages.
What is an Express Contract?
An express contract differs from lawsuits claiming quantum meruit and unjust enrichment because express contracts not only explain what work is to be performed but also how much the work is worth. How much the work is worth is called the contract price.
In lawsuits involving an express contract, all courts have to do when assigning damages is look at what the contract price is and whether the party performing the work did enough to earn the contract price. These suits are called breach of contract lawsuits because, although the parties laid out exactly what must be done and how much that work is worth, one of the parties failed to meet its obligation. In our deck and carpenter example, the property owner would have breached the contract by not paying the carpenter what the owner promised he would pay.
If an Express Contract Exists, Can an Unpaid Subcontractor Still Sue Under Quantum Meruit or Unjust Enrichment?
We are finally getting to the heart of this post in answering the question: If a subcontractor and property owner or general contractor are parties to an express contract, can the unpaid subcontractor use both a mechanics lien and quantum meruit/unjust enrichment to get paid?
For many years, courts in Virginia and all other 49 states have mostly agreed that a mechanics lien arising out of an express contract and all other claims are mutually exclusive. In other words, if an unpaid subcontractor files a mechanics lien, it cannot also sue under quantum meruit and unjust enrichment.
Of course, there are always complicating factors. For example, using our carpenter and deck example one last time, what happens if there are two co-owners of the property but only one of them is listed in the contract to build the deck? Can the carpenter file a mechanics lien against the listed property owner but file a claim for unjust enrichment or quantum meruit against the unlisted property owner?
The question just came up in a case before the Supreme Court of Virginia, Smith v. Owens. (Unfortunately, the decision was unpublished so we can’t link to the actual opinion itself.) In Smith, the court held that even if a property owner or other beneficiary of work performed isn’t listed in a contract, the question should be not what parties are listed but what the subject matter of the contract is. So long as the subject matter of the contract is properly described and a contract price assigned, it doesn’t matter who is listed as a beneficiary or owner in the contract.
So long as the subject matter of the contract is properly described and a contract price assigned, it doesn’t matter who is listed as a beneficiary or owner in the contract.
What Does the Ruling in Smith Mean Moving Forward?
For starters, because the opinion is still unpublished, it’s unclear how much weight the case will carry in influencing future court decisions. In other words, the court’s ruling may be limited to the individual situation raised in the case only.
However, assuming that the case can be used as precedent, what does its ruling mean for unpaid subcontractors?
First, so long as an express contract exists, presumably unpaid subcontractors can only rely on mechanics liens and not unjust enrichment or quantum meruit. Even if other parties besides the party or parties listed in the contract benefit from the subcontractor’s work, the subcontractor cannot sue those unlisted parties directly other than in a suit to foreclose on a mechanics lien.
Smith v. Owens affirms the power of a properly filed mechanics lien
Second, and in a much broader sense, the case affirms the power of a properly filed mechanics lien. In all situations where an express contract or subcontract exists, a mechanics lien forces anyone who benefits from a construction project as a whole to pay off that lien, whether or not they are listed as parties in the contract.
Thus, while subcontractors in Virginia may be concerned that they have less avenues to get paid if an express contract exists, a mechanics lien still is the best way of forcing property owners and other beneficiaries of work performed to pay the party that performed that work.