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Case on Law of Quantum Meruit

Case Analysis Puran Lal Sah versus State of UP Submitted by – Aseem Agarwal (12PGPIM04) Nitin Gupta (12PGPIM21) Rahul Jain (12PGPIM24) Saumitra Das (12PGPIM28) Nishant Shah (12PGPIM29) Supreme Court of India Puran Lal Sah vs State Of U. P on 21 January, 1971 Equivalent citations: 1971 AIR 712, 1971 SCR (3) 469 Bench: Reddy, P Jaganmohan PETITIONER: PURAN LAL SAH Vs. RESPONDENT: STATE OF U.

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Contract-Claim on basis of Quantum Meruit – When sustainable Brief Facts of the Case The Public Works Department of the State of UP had issued a tender notice to construct Mile 3 of the Nainital – Bhowali Road. They published Schedule B rates based on the calculation that stone would be available within 26 chains. The appellant inspected the site and found that there was stone available for construction within 26 chains. Satisfied he submitted a tender at 13% below the rates given in Schedule B on 30th September, 1946. Finally the tender was accepted and contract signed on 20th November, 1946.

However when the appellant tried to take stone from the specific area, he was stopped by Cantonment authorities. Furthermore he was not given permission from the Cantonment authorities for the removal of stones. As a result he had to get stone from Gadhera and Bhumedar from a distance of 79 and 110 chains respectively. Also during the construction of the road he encountered very hard shale rock that wasn’t mentioned in the contract as result of which he had to do some extra work. He requested for a higher rate from PWD but was rejected.

After that he commenced the work, finally when the work was finished the Executive engineer forwarded his request for a higher rate. In his letter dated 15th June 1950 he mentioned that since the appellant was unable to get the stone from within 26 chains and had to bring it from outside, he is entitled to get extra compensation. Under para 5 of the contract the appellant must be prepared to execute the work at original tender rate in excess of the given quantities of work upto 30 % and if he works in excess of 30% he is entitled to refuse the work if the rates are not increased.

Since the appellant worked in excess of 30% he claimed a higher rate of payment for this extra work – Rs 48,840 due as balance together with interest by way of damages at 12% amounting to Rs 17,582 making a total of Rs 66,422. When this claim was rejected the appellant gave notice under Section 80 of the CPC and filed a suit for the above amount. The defendant-respondent resisted the suit due to 3 reasons – 1) No assurance was given to the appellant by officers of the PWD as alleged by them. ) Quantity of very hard shale rock shown by the appellant was false. 3) Under para 5 of the contract the appellant must be prepared to execute the work at original tender rate in excess of the given quantities of work upto 30 % and if he works in excess of 30% he must intimate to Engineer-in-charge in writing his willingness or refusal to do extra work at original rates and if he refuses to carry on at the original rates he is required to settle fresh rates for increased work over 30% before doing the work.

The appellant did no such thing but continued to work even after it went in excess of 30%. The trial court held issues 1, 2, 6 and 7 in favour of the appellant while issues 3, 4 and 5 were decided against him. As a result a decree for a sum of Rs 20,495 for extra lead plus Rs 1,653 for extra work done under the item very hard shale and Rs 4,155 interest by way of damages on Rs 22,158 making it a total of Rs 26,313 was passed with interest at 3 per cent per annum. The High court however reversed the decree for 2 reasons – ) Employment of the figure 26 chains was for no other purpose that that of calculation, it could not be held give any assurance/guarantee to the contactors that they would get stone within the distance. 2) Plaintiff – appellant performed the work required of him without exercising his right under para 5 of the contract which gives him right to demand fresh rate in due of excess work done by him above 30 %. The appeal of the respondent was allowed and the suit dismissed. The case was taken for trial in the Supreme Court and the judgement is as given subsequently.

Issues There were two main issues. 1) Whether the estimate of the PWD formed part of the contract so as to be binding on both parties and whether any assurance were given to the appellant that he would be given higher rates from bringing the stones from places situated at 79 chains and 110 Chains respectively. 2) Whether clause 5 of the special conditions of the contract was applicable to the extra item of work and whether he was entitled on the assurances given by the local officers to higher rate for the extra work done. Judgement ) a) In-none of the clauses of the tender notice or conditions of contract or in any other document was there any assurance that if stone was not available at the distance of 26 chains the appellant would ‘be paid higher rates. It was for the appellant to have satisfied himself before entering into the contract that the Cantonment authorities would permit him to take the stone. Since be commenced work after his request for higher rate was rejected, it could not be said that the appellant was in any way induced by any assurance. The Executive Engineer’s letter was only recommendatory and did not establish any right to obtain a higher rate. ) It could not be said that once stone was not available at a distance, of 26 chains, the contract was at an end and that because the appellant had done the work, he should be paid on the basis of quantum meruit. That remedy would be available only when the original contract had been discharged by the defendant in such a way as to entitle the plaintiff to regard himself as discharged from any further performance, and be elects to do so; but, where work is done under a contract persuant to its terms no amount can be claimed by way of quantum meruit. Adopi Parshad & Sons.

Ltd. v. Union of India, [1960] 2 S. C. R. 793, followed. 2) The appellant could not succeed on second point also because under clause 12 of the contract Ext. B-1, the plaintiff was bound to perform additional work up to 30% on the same terms and conditions on which he undertook to do the work. The quantity of work that appellant performed was far in excess of what was mentioned in Ext. B-3. The Appellant therefore claimed payment for the work done by him in excess of the quantity mentioned in the contract plus 30% at the current rate as against the stipulated rates.

Para 5 of the special instructions provides as follows: “Contractors must be prepared to do at their original tender rate in excess of the given quantities of work up to 30%. If an increase in excess of 30% is ordered over the work, the contractor must intimate in advance his willingness or refusal to work at the originally tendered rates. In the latter case, he should also settle fresh rate for increases work over 30% before doing the work. Since there is no evidence nor it is claimed by the appellant that he had given any notice as required under Para 5 of the pecial instructions and since he did the work without fulfilling these requirements he is not entitled to claim any amounts at a higher rate for extra work done. Sections/Acts Sec 73 Indian Contract Act, 1872: Compensation for loss or damage caused by breach of contract. – When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract – When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract. Explanation. In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused- by the non- performance of the contract must be taken into account Contract Claim on basis of Quantum Meruit The term “quantum meruit” means “as much as is merited” or “as much as earned”. It provides that where a person has done something or rendered some service for another, or delivered goods to him not intending to do so gratuitously, then he is entitled to recover a reasonable sum in case the contract has not been fully performed.

Grounds for Claiming on the basis of quantum meruit: a. Work done in pursuance of a contract which has been discharged due to the defendant. b. Where services are rendered under an agreement which is discovered to be void. c. Where a person enjoys the benefit of a non-gratuitous act (Section 7). d. Where the contract is divisible and the party has enjoyed the benefit of the work done. Limitations: a. Where a contract requires complete performance. b. A person who is himself guilty of breach cannot sue on quantum meruit. . Any claim upon the basis of quantum meruit cannot be entertained unless there is evidence of an express or implied promise to pay for the work which has already been done. Others Cited Cases Alopi Parshad and Sons v. Union of India – This case was cited for the help to understand the present case for the interest as Damages or interest on damages. Case mentioned that the compensation on the principle of quantum meruit is awarded for work done or services rendered when the price thereof is not fixed by contract.

It means when there is express term of an agreement the quantum meruit will not apply. As there is agreement and rates are fixed there cannot be any implied contract as express contract is present. Thus compensation quantum meruit cannot be awarded. Conclusion Quantum Meruit: The general rule is that unless one party has performed his obligation in full. He cannot claim performance from the other. However in certain cases, when one party has done some work under the contract and contract gets discharged due to some reason (not because of the party which has done some work).

He is entitled to be paid for the work he has done. This is the principle of quantum meruit which means “as much as merited or earned” References: 1. Bansal, C L. (2006). Business and Corporate Laws. New Delhi, India: Excel Books. 2. Puran Lal Sah vs State Of U. P. Retrieved from http://www. indiankanoon. org/doc/1394427/ 3. Section 73 in The Indian Contract Act, 1872. Retrieved from http://www. indiankanoon. org/doc/339747/ 4. M/S. Alopi Parshad & Sons, Ltd vs The Union Of India. Retrieved from http://www. indiankanoon. org/doc/1989300/