Getting paid top rate when you didn't set a price

Small company owners and individual suppliers will be forgiven for letting out a groan to news earlier this month that the government has merely “reaffirmed its commitment” to tackling the age-old scourge of late payment.

When you didn’t price your services

Although they will no doubt welcome the move, the truth is there are many times that we are contacted by such small, typically freelance traders, out-of-pocket because work has been carried out by them but, often, where no price was fixed. So does this leave the workman without a claim?

Not a bit of it. In fact, it has long been a principle of English law that someone should not have the benefit of unjust enrichment.

There are three possible scenarios.

1. Work has been done under a contract that has subsequently been found to be invalid
2. Work has been done for someone who expressly or impliedly requested it but no price was agreed
3. A price was agreed but only part of the work was carried out

The principle is known as ‘quantum meruit.’ And no, it is not a Bond movie, but Latin which translates as “as much as he has earned”. But the biggest question is just how much has he earned?

Working out your dues

The courts award a fair and reasonable sum based on the market value at the date the work or services were undertaken. That does not mean just the cost to the workman. A significant Court of Appeal case Beneditti v Sawiris (2009) made it clear that there were a number of factors which may be relevant depending on the circumstances of the claim.

The value of the benefit received by the paying party is one possible factor. Another is any unsuccessful negotiations which may suggest the market value in terms of the parties’ offers.

But it is certainly not a valid argument to say that little work was carried out. Market value may suggest that the value has no relationship to the base value of the actual work carried out. This may be relevant with artistic works.

Recruiters covered too

Also work which by custom is priced by a commission percentage. Examples are introduction services, such as recruitment agencies. In Mr Beneditti’s case he was a financial deal broker, where work was normally valued on a commission basis. He was entitled to a very large commission even where the actual amount of work carried out was very small in comparison.

So, if there is no signed contract and no agreed price, that is not the end of the road.

Market value should be able to show the bottom and top end of the fee range for that type of work, and the worker should not receive less than the bottom end of the scale.

So if you have a contract dispute concerning the price it may well pay you to obtain early legal advice.

As told to ContractorUK by Nigel Musgrove, business and litigation solicitor for Cousins Business Law.

Monday 20th August 2012