Tuesday, March 15, 2011

Client v Contractor Part 3

Let’s take a break from the story, and look at the legal implications behind the situation.

Whenever work is done in response to request by a party, even without a written contract, the party providing the service/work is entitled to a quantum meruit claim. The expression quantum meruit basically means ‘the amount he deserves’ or ‘what the job is worth’. It is a claim for a payment for the work executed where no price has
been agreed or quantified, and usually a claim being assessed in a ‘reasonable sum’, ‘reasonable remuneration’, ‘fair market rates’, ‘fair commercial rates’ or on similar terms.

Read more on quantum meruit at: http://www.mbam.org.my/mbam/images/@ENTRUSTY%20-%20QuantumMeruit%20(100-103).pdf

In Adam and Joe’s situation, Joe must substatiate his claim by proving the total costs incurred and payments made by him in carrying out the works.

Another example is where a plumber has been called in by a house owner for an emergency repair and no price was agreed in advance. Upon completion, the plumber cannot simply take advantage of the situation and drop a bomb on the house owner. He is only entitled to a reasonable sum for such service, nothing more and nothing less.

Should Adam and Joe decided to sign a proper agreement right from the outset; they would have had a proper CONTRACT SUM which was agreed by both parties. In general, a contract sum would overrule quantum meruit claims. A contract sum can be below or above the fair market price and both parties has to honour it!

to be continued...

Monday, March 14, 2011

Client v Contractor Part 2

Within a week, Joe came in with his workers and started on the renovation work. When the work was well in progress, Joe sat down with Adam to discuss payment. Joe asked for an RM10k progress payment to pay for materials and his workers. Satisfied with the progress, Adam wrote a check immediately!

2 weeks later, when the plumbing and wiring were almost completed, the works came to a complete stop. There had been no workers at site for 3 days. Adam went to see Joe to seek clarification. He found out that Joe had terminated his Indonesian sub-contractors and was facing some financial problem. He had spent RM25k so far and material prices were rising partly due to shortage of cement and sand in the market. He foresaw that it would cost more than RM55k to complete the whole renovation.

Adam started to wonder whether he had been shortchanged. He didn’t have a clear idea of what the final cost would be but he was very clear on his limited budget.

to be continued..

Sunday, March 13, 2011

Client v Contractor Part 1

Adam just moved in to a new neighborhood. He met Joe, his new neighbor and found out that Joe is a Class F contractor. He also found out that they came from the same hometown and the bonding started instantly. One day over a cup of tea he mentioned to Joe his intention to renovate his kitchen and that he had a few quotations ranging from 25k to 50k. Joe offered his service and suggested that he will give better value for money! As he was trying to appear not being too calculative to his new friend, Adam accepted the offer, and no definite cost or time limit was mentioned. He was comfortable enough to trust that his good neighbor will do it within reasonable cost and reasonable time. At the back of his mind, Adam even believed that Joe will do the job for minimal profit!

to be continued..