Understanding Quantum Meruit: Getting Paid for Work Done Without a Written Contract

F. F. MAÑACOP CONSTRUCTION CO., INC., PETITIONER, VS. COURT OF APPEALS AND THE MANILA INTERNATIONAL AIRPORT AUTHORITY, RESPONDENTS. G.R. No. 122196, January 15, 1997

Imagine a scenario where you hire a contractor to build a fence around your property. You verbally agree on the price, and the contractor starts the work. However, before the project is completed, you stop the construction, leaving the contractor with unpaid expenses. Can the contractor recover payment for the work already done? This is where the principle of quantum meruit comes into play.

This case, F. F. Mañacop Construction Co., Inc. vs. Court of Appeals and the Manila International Airport Authority, explores the application of quantum meruit in government contracts. The central legal question is whether a contractor can be compensated for work performed on a government project, even without a fully executed written contract, and if so, how the amount due should be determined.

The Legal Basis of Quantum Meruit

Quantum meruit, Latin for “as much as he deserves,” is an equitable doctrine that allows a party to recover reasonable compensation for services rendered or work performed, even in the absence of an express contract. It prevents unjust enrichment, ensuring that someone who benefits from another’s labor or materials pays a fair price for those benefits.

The principle is rooted in quasi-contracts, which are obligations imposed by law based on fairness and equity, rather than on a mutual agreement. Article 2142 of the Civil Code of the Philippines states that “Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.”

For instance, if you mistakenly deliver groceries to your neighbor’s house, and they consume them knowing they weren’t intended for them, they have an obligation to pay you for the groceries under the principle of quasi-contract and, potentially, quantum meruit if the value of goods consumed is in question.

Several conditions must be met for quantum meruit to apply:

• The services were rendered or work was performed in good faith.
• There was an expectation of payment for the services or work.
• The other party knowingly accepted the benefits of the services or work.
• It would be unjust for the other party to retain the benefits without paying.

The Manila Airport Fence Case: A Detailed Look

In this case, F.F. Mañacop Construction Co., Inc. (Mañacop) began constructing a perimeter fence for the Manila International Airport Authority (MIAA) based on an initialed Notice to Proceed, even before the general manager formally signed it. The construction was urgently needed to prevent squatters from entering the area.

Here’s how the events unfolded:

• September 1985: Mañacop starts building the fence based on an initialed Notice to Proceed for P307,440.00.
• Post-February 1986 Revolution: The new MIAA general manager halts the construction when it is 95% complete, worth P282,068.00.
• Repeated Demands: Mañacop repeatedly demands payment, but MIAA ignores them for two years.
• Lawsuit Filed: Mañacop sues MIAA to recover payment for the completed work.

The trial court ruled in favor of Mañacop, ordering MIAA to pay P238,501.48 based on quantum meruit, along with attorney’s fees. The Court of Appeals (CA) reversed this decision, directing the trial court to refer the computation of the amount due to the Commission on Audit (COA).

The Supreme Court ultimately reversed the CA’s decision, reinstating the trial court’s ruling. The Court emphasized that the issue of referring the matter to the COA was raised for the first time on appeal and should not have been considered. More importantly, the Court affirmed the applicability of quantum meruit in this situation, and that the lower court had already made a factual finding on the amount reasonably due to the petitioner and scrutinized the evidence.

Here are some key quotes from the Supreme Court’s decision:

“Well-recognized jurisprudence precludes raising an issue only for the first time on appeal, as it would be offensive to the basic rules of fair play and justice to allow private respondent to raise a question not ventilated before the court a quo.”

“Quantum meruit allows recovery of the reasonable value regardless of any agreement as to value. It entitles the party to ‘as much as he reasonably deserves,’ as distinguished from quantum valebant or to ‘as much as what is reasonably worth.’”

Practical Implications of the Ruling

This case reinforces the principle that contractors can recover payment for work done, even without a fully executed contract, under the doctrine of quantum meruit. It also clarifies that the courts, not just the COA, can determine the specific amount due based on equitable principles. This ruling is particularly relevant for construction projects where work begins before all formalities are completed.

For businesses and individuals entering into contracts, the key lessons are:

• Document Everything: Always strive for a written contract that clearly outlines the scope of work, payment terms, and responsibilities of each party.
• Act in Good Faith: Ensure that all actions are taken in good faith and with the intention of fulfilling obligations.
• Seek Legal Advice: Consult with a lawyer before starting any work without a formal contract, especially on government projects.

Frequently Asked Questions (FAQs)

Q: What is quantum meruit?

A: Quantum meruit is a legal doctrine that allows a party to recover reasonable compensation for services rendered or work performed, even in the absence of an express contract. It is based on the principle of preventing unjust enrichment.

Q: When does quantum meruit apply?

A: It applies when services are rendered in good faith, there is an expectation of payment, the other party knowingly accepts the benefits, and it would be unjust for them to retain the benefits without paying.

Q: Can quantum meruit be used in government contracts?

A: Yes, but certain conditions must be met, such as the absence of fraud, a specific appropriation for the project, and substantial compliance with the obligation.

Q: Who determines the amount due under quantum meruit?

A: The courts can determine the amount due based on the reasonable value of the services or work performed. The COA may also be involved, but the courts have the final say.

Q: What is the importance of having a written contract?

A: A written contract provides clarity and certainty regarding the terms of the agreement, minimizing disputes and ensuring that both parties are protected.

Q: What should I do if I start work based on an initialed document but no formal contract?

A: Immediately seek to formalize the contract. Document all work performed and communications with the other party. Consult with a lawyer to understand your rights and options.

Q: What if the government stops a project midway through?

A: You may be able to recover payment for the work completed under quantum meruit, provided you acted in good faith and the government benefited from your work.

ASG Law specializes in construction law and government contracts. Contact us or email hello@asglawpartners.com to schedule a consultation.