Understanding the Legal Concept Known as “Quantum Meruit” Under NJ Contract Law

HNWContract Law

  • In order to receive payment under a defective contract a legal claim called “quantum meruit” must be asserted to win; “a plaintiff must establish”: (1) the performance of services in good faith, (2) the acceptance of those services by the person to whom they are rendered, (3) an expectation of compensation therefor, and (4) the reasonable value of the services.”
  • In a recent NJ case, a sales representative claimed she performed services in good faith, provided the customer with helpful and necessary information and claimed the defendant(s) accepted her services, as evidenced by their communications regarding the property.
  • The court denied her quantum meruit claim. This blog explains why.

I Deserve to Get Paid – The Contract Legal Doctrine Known as Quantum Meruit Video

Background of Case

In this breach of contract case, the plaintiff asserted the existence of communications demonstrating that there was an expectation of compensation in a pending contract deal.  Plaintiff pointed to a text message sent to her which stated, “I will pay you [a] fee directly”.  Plaintiff claimed the commission value she sought was “reasonable.”  Consequently, as a result of her efforts, defendants were able to purchase the property for a lower price, and, plaintiffs were therefore entitled to damages and equitable relief.  The Appeals Court disagreed because plaintiffs failed to comply with the statute of frauds, which requires certain contracts to be in writing to be enforceable.

The court held that prior to 1996, a buyer could be liable to pay quantum meruit compensation to a broker, where the two did not form an enforceable agreement; but, the version of the statute of frauds at that time required a writing only when the seller was responsible for the commission, and did not bar oral agreements between a buyer and a broker.

However, a 1996 revision of the statute of frauds requires a signed writing when a broker seeks a commission from a “principal” as distinct from only a seller, expanding the reach of the statute to commissions sought from buyers, sellers, or owners.

In another case, the court remanded the case for a determination of compensation based upon on a quantum meruit claim, where the plaintiffs had served as a broker in procuring a tenant for a commercial lease.  A draft of the lease prepared by the landlord and tenant explicitly stated that the plaintiffs had negotiated the transaction and the landlord would be responsible for the broker’s fees.

In this case, there was substantial evidence the plaintiffs had provided valuable services that enriched the defendant; it was undisputed that the defendant accepted those services; and there was evidence the parties all expected the plaintiffs would be compensated in some amount for their services.

In any event, the statute of frauds in this case still defeated plaintiffs’ claim for a finder commission.  The statute of frauds applies to commission claims by a “real estate broker,” who is defined as “a licensed real estate broker or other person performing the services of a real estate agent or broker.”  N.J.S.A. 25:1-16(b), (a), which covers even the limited activity of introducing a potential buyer and seller of real estate, without participating in the parties’ negotiation of price and terms – in other words, the work of a “finder” – is the activity of a real estate broker.

Here, the judge acknowledged “the apparent harshness of the outcome,” but found “the facts here [did not] compel[] an award on quantum meruit.

To discuss your NJ contract matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Contract Law Attorney

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