Rajah Lehal

Contractors need to specify payments for incomplete tasks

October 26, 2016

When drafting a work-related contract, ensure that payment due for the completion of the task, as well as payment due for partial completion of the task is included and specify the degree of completion for each respective payment amount.

Generally, in a lump sum contract, there is no right to partial payment if the task specified within the contract is not completed. If a contract indicates that a contractor will charge a certain amount for the completion of a task, then the contractor cannot sue for payment resulting from partially completing a task.

Quantum merit, the reasonable value of one’s services, also will not apply unless there is a contract that specifies that payment will be required for partial completion of the task.

Sumpter v Hedges [1898] 1 QB 673 stands as precedence for this rule. In this case, Mr. Sumpter (“Sumpter”) was a builder, who had entered into a contract with Mr. Hedges (“Hedges”) to build two houses and stables for £565. Sumpter completed work valued at £333 but did not have enough money to complete the task. Hedges finished the remainder of the task, using material that Sumpter had left behind. Sumpter had already been paid part of the £565, but sued for the outstanding amount.

The Court of Appeal found that Sumpter was not owed the outstanding amount because he had abandoned the contract. Hedges did not need to reimburse Sumpter for partially completing the task. Sumpter was entitled to compensation for the value of the materials that Hedges had used to complete the task. The Court of Appeal found that where there is a contract to do work for a lump sum, payment for the work cannot be recovered until the work is completed. Furthermore, it was found that Sumpter was not entitled to recover for the work he did on a quantum merit.

For quantum merit to exist there must be evidence of a new contract that specifies payment for the work previously completed. Quantum merit can also exist where there is evidence that the defendant had the option to take benefit of the work done. Had Hedges been given the option of benefitting from partially completed buildings, then Sumpter may be entitled to quantum merit, however; as in the case of work done on buildings, the defendant is given not given an option to take benefit of the work done or not. As a result, Sumpter is not entitled to quantum merit.

Duty of Good Faith

As a side note, it is also useful to include a duty of good faith as a provision within the contract, as this duty will obligate the party receiving the goods/services to honour an “equitable” or “fairness” obligation to provide payment for useful services received.

Employment Agreement
Independent Contractor
Consulting Agreement

Written by Rajah. Rajah Lehal is Founder and CEO of Clausehound.com. Rajah is a legal technologist and technology lawyer who is, together with the Clausehound team, capturing and sharing lawyer expertise, building deal negotiation libraries, teaching negotiation in classrooms, and automating negotiation with software.