The Developer's Defence Manual - How to Dismantle a Builder's Quantum Meruit Ambush in Queensland

Q: How is 'reasonable value' determined in a quantum meruit case?

'Reasonable value' is not determined by the builder's invoice. It is assessed based on evidence, which can include the actual costs incurred by the builder (proven with invoices), prevailing industry rates for similar work, and expert opinion from a quantity surveyor. The quality of the finished work is also a factor; defective work is not valued at full price.

Q: Is going to QCAT my only option to fight a claim?

No. Before formal litigation, you can engage in 'without prejudice' negotiations or mediation or expert determination to reach a commercial settlement. These alternative dispute resolution methods are often faster and more cost-effective than a formal hearing at the Queensland Civil and Administrative Tribunal (QCAT) or in the courts.

John Merlo
7 days ago
14 min read

The project is nearly complete, there were additional works performed which were not within the scope of the original contract, your superintendent directed that the works be undertaken in accordance with the rates provided in the contract, the builder was of the view that the works were not a part of the contract and disagreed with the rates, but performed them anyway, and you're ready to move to the next phase. Then, the ambush: an invoice arrives from your builder’s lawyers, withholding vital certificates, and claiming an exorbitant amount. This is a classic quantum meruit claim.

Quantum meruit is a legal principle, derived from Latin meaning "as much as he has deserved," that allows a party to recover the reasonable value of goods or services provided when there is no formal, enforceable contract, or when a contract doesn't specify payment —and it represents a significant financial and legal threat to property developers. In Queensland, where post-completion issues are common—the Queensland Building and Construction Commission (QBCC) handled 5,344 post-completion defect disputes in 2022-2023 alone—understanding how to defend against these claims is not just useful; it's essential for protecting your bottom line.

This manual is designed for developers, providing the legal insights and evidentiary strategies needed to dismantle a builder's surprise quantum meruit claim before it escalates.

Key Takeaways

Contract is King: A well-defined, written contract with clear terms for variations and payment is your primary shield against ambiguous quantum meruit claims.
Documentation Defeats Ambiguity: Meticulous records of all communications, directives, variations, and site diaries are the ammunition you need to dismantle a claim based on "unspoken" agreements.
Challenge the "Reasonable" Value: A quantum meruit claim hinges on proving "reasonable" payment. Developers can successfully challenge this by scrutinising the builder's evidence of costs, market rates, and the actual quality of the work performed.
Understand the QBCC's Limits: The QBCC primarily deals with licensing, compliance, and defective work, not complex contractual payment disputes like quantum meruit, which often require legal action through QCAT or the courts.

Understanding the "Post-Project Ambush"

What Exactly is a Quantum Meruit Claim in Construction?

Quantum meruit is a Latin term meaning "the amount deserved." In law, it represents a remedy to ensure fair payment for work performed when a standard contract is not enforceable or doesn't cover the specific work done. It is not a claim under a contract, but a claim outside of it. The legal principle underpinning it is "unjust enrichment." The builder argues that the developer has received a benefit (the completed work) and it would be unjust for them not to pay a reasonable price for it. Grasping this distinction is crucial for developers, as it means the builder is attempting to bypass the agreed-upon contract price and payment structure, creating a new battleground for these construction disputes.

Why This Ambush Tactic is a Threat to Developers

Imagine this scenario: a developer, "David," is managing a multi-unit residential project in Brisbane. The builder, "ConstructCo," frequently performs minor changes based on verbal site discussions to keep the project moving. David assumes these are minor adjustments covered by goodwill or a general contingency. After the project's practical completion, David receives an inflated invoice for $250,000 of "undocumented variations." ConstructCo initiates a quantum meruit claim, arguing they were instructed to do the work and deserve reasonable payment. This forces David into a costly and time-consuming legal battle, sifting through old emails and site notes to prove the work was either covered by the original scope or not properly approved. This highlights the severe financial and project-delay risks of such an ambush, turning a finished project into an ongoing liability.

The Alarming Rise of Post-Completion Disputes

Informal "handshake" agreements and poor documentation on site are creating fertile ground for these post-project disputes. The QBCC's own data shows that the vast majority of building disputes arise after completion, a point when memories have faded, key personnel may have moved on, and evidence is much harder to gather. A quantum meruit claim is particularly dangerous because it allows a builder to bypass the agreed contract price, effectively giving them a second chance to increase their profit margin at the developer's expense. This tactic turns poor record-keeping into a potential windfall for the builder and a serious commercial risk for the developer, making robust contract administration and documentation non-negotiable.

When Can a Builder Launch a Quantum Meruit Claim?

A builder can't simply invent a quantum meruit claim out of thin air. Specific legal circumstances must exist that open the door for a claim based on unjust enrichment. For developers, understanding these triggers is key to closing them off before they can be exploited. These situations typically arise when the certainty of a written contract is undermined or absent.

The Void or Unenforceable Contract Scenario

The most straightforward path to a quantum meruit claim is when the governing contract, or key clauses within it, are found to be void, unenforceable, or non-existent. This can happen for several reasons in Queensland. For instance, the contract may fail to comply with the formal requirements of legislation like the Queensland Building and Construction Commission Act 1991 or, for residential projects, the relevant provisions in Schedule 1B of the Queensland Building and Construction Commission Act 1991 (which replaced the repealed Domestic Building Contracts Act 2000 in July 2015). Additionally, residential building contracts may be subject to the unfair contract terms regime under the Australian Consumer Law. Another common example is where a builder is not appropriately licensed under section 42 of the QBCC Act for the specific type or value of work they performed.

Section 42 prohibits a person from carrying out or undertaking to carry out building work unless they hold a contractor's licence of the appropriate class. If the contract is deemed unenforceable, the builder cannot sue for the contract price, but they can generally sue for the reasonable value of work they completed via quantum meruit. However, where a builder is unlicensed in breach of section 42 of the QBCC Act, their recovery may be limited to only reasonable expenses actually incurred and paid, rather than the full reasonable value of their services.

Work Performed Outside the Original Scope

This is the most common ambush scenario. A developer might request additional work on site—perhaps a change to finishes or a minor structural alteration—without executing a formal, written variation. The builder completes the work. Later, the builder argues that this work falls completely outside the original contract's scope of work and was performed at the developer's request. Because there is no agreed price for this "separate" work, they claim they are entitled to a reasonable payment for it. This argument is often used to inflate costs for work that the developer assumed was a minor, agreed-upon change that would be handled with minimal fuss and cost.

When a Contract is Wrongfully Terminated

Developers must be extremely cautious about the risks of improperly terminating construction contracts. If a developer repudiates (wrongfully ends) a contract, the builder has a choice. They can either sue for damages based on the breach of contract, or they can accept the repudiation, treat the contract as over, and sue on a quantum meruit basis for the value of all work completed. This can be a disastrous outcome for the developer. The "reasonable value" claimed by the builder could far exceed the pro-rata payments that would have been due under the contract, resulting in a much higher payout than anticipated. This makes seeking professional legal advice absolutely critical before taking any steps to terminate a building contract.

Your First Line of Defence: The Power of a Watertight Contract

The most effective way to dismantle a quantum meruit ambush is to prevent it from ever gaining a foothold. This is achieved through a meticulously drafted and rigorously administered building contract. A clear, unambiguous contract removes the grey areas that builders exploit, making it the developer's single most powerful defensive tool.

Critical Consideration for Site Supervisors: Variation vs Collateral Contract

Site supervisors must carefully evaluate whether work being requested constitutes a variation under the existing contract or work that would create a separate collateral contract. A collateral contract is a separate, secondary agreement that exists alongside the main contract—essentially a distinct contract for additional work that falls completely outside the original scope.

The distinction is crucial: variations are modifications to existing contractual work and should follow the contract's variation procedures, while collateral contracts involve entirely new work arrangements. If a supervisor instructs work that genuinely falls outside the contract scope without following proper variation procedures, they may inadvertently create a collateral contract, opening the door for quantum meruit claims on that separate work. This underscores the importance of carefully assessing whether requested work is truly additional to the contract or merely a modification of existing obligations.

Mandating Written, Signed Variations for All Changes

The critical importance of a "no variation unless in writing and signed by both parties" clause cannot be overstated. This clause should be a non-negotiable component of all your builders contracts. It acts as a powerful legal shield, shifting the burden of proof squarely onto the builder to produce a signed variation order for any work they claim is additional to the scope. When a builder later submits an invoice for "verbal instructions," the developer can simply point to this clause. This simple contractual discipline can shut down the majority of ambiguous "he said, she said" claims for extra work, as it establishes a clear, agreed-upon procedure for any variation to contract. Without the signed document, the builder's claim has no contractual basis.

Defining Scope, Provisional Sums, and Prime Cost Items with Precision

Ambiguity is the enemy of a developer's budget. The defence against scope-creep claims begins with clearly defining the project's entire scope of work in the initial contract. Every task, material, and deliverable should be specified. This precision must extend to how you document and manage provisional sum allowances (for work like excavation where the final cost is unknown) and prime cost items (for specific fixtures and fittings like taps or appliances). The contract must explicitly state what is included in these sums and outline the exact process for confirming final costs.

Precise definitions prevent builders from later claiming that work related to these items was "extra" to the contract. For example, if a provisional sum for landscaping is clearly defined, the builder cannot later claim the labour for laying turf was an extra justifying a quantum meruit claim.

Why "Cost Plus" Contracts Require Extreme Diligence

While cost plus contract arrangements offer flexibility, they are highly susceptible to quantum meruit-style disputes if not managed with extreme diligence. The absence of a fixed price means the developer is agreeing to pay the builder's actual costs plus a margin. This necessitates meticulous, contemporaneous record-keeping of every cost claimed by the builder. Developers must actively audit all invoices, dockets, and timesheets to ensure the costs are legitimate, reasonable, and directly attributable to the project. Without this rigorous oversight, the contract can effectively become a blank cheque, inviting inflated claims.

For complex projects utilising this model, you should always seek advice from a specialist building and construction lawyer. They can help structure the contract with clear auditing rights and definitions of "cost" to protect you from post-project financial surprises.

The Developer's Playbook for Dismantling the Claim

Even with a strong contract, an opportunistic builder may still try their luck with a quantum meruit claim. When this happens, a developer needs a clear, evidence-based strategy to dismantle it. The focus must shift to challenging the two pillars of the builder's claim: the assertion that the work was extra, and the "reasonable" value they have assigned to it.

Infographic detailing the 'Quantum Meruit Defence Strategy' by Merlo Law. The flowchart outlines a legal process starting with 'Claim Received' and 'Immediate Action'. Key steps include contacting Merlo Law for professional guidance, reviewing contract documentation, and determining if a 'Written Variation Only' clause exists. If so, the claim may be rejected based on contract terms. If not, the strategy involves challenging evidence, demanding a complete cost breakdown (invoices, timesheets), and engaging an independent quantity surveyor to assess the true market value of work. The final stages involve comparing claimed vs. reasonable value, entering settlement negotiations, and proceeding to formal dispute resolution (QCAT/Court) if necessary.

Challenging the "Reasonable" Value of the Work

The first step upon receiving an inflated claim is to demand a complete, itemised breakdown of the builder's alleged costs. Do not accept a single lump-sum figure. Once you have this, the next move is to engage an independent quantity surveyor or building consultant. Their role is to professionally assess the true market value of the work performed, based on industry rates for labour and materials in your location (e.g., Brisbane or the Gold Coast). This expert report becomes powerful evidence. It allows you to move the argument away from the builder's unsubstantiated figures and towards a fact-based discussion, demonstrating that the claimed amount is inflated and not "reasonable" by objective industry standards.

Exposing Inadequate Evidence and Poor Record-Keeping

The burden of proof in a quantum meruit claim lies entirely with the person making it—the builder. They must prove not only that the work was done at your request but also that the amount they are claiming is reasonable. As the developer, your strategy is to demand the evidence to support every dollar claimed. This includes supplier invoices, subcontractor contracts, detailed timesheets for all labour, site diaries, delivery dockets, and photographic evidence. The absence of this documentation is a major weakness. If the builder cannot produce clear, contemporaneous records to substantiate their costs, their position is significantly weakened. This lack of evidence can be a key point of attack in dismantling their claim during negotiations or legal proceedings.

Leveraging Your Own Meticulous Documentation

A developer's own records are their best weapon in this fight. Your meticulous documentation creates a counter-narrative to the builder's claims. Contemporaneous notes from site meetings, emails that confirm verbal conversations ("To follow up on our discussion this morning..."), and regular progress photos create a credible, timeline-based record of the project. This body of evidence can directly contradict a builder's later assertions about what was said or agreed to. When presented in negotiations or at the Queensland Civil and Administrative Tribunal (QCAT), a well-documented file demonstrates professionalism and credibility, often exposing the builder's claim as an opportunistic afterthought.

The Role of Without Prejudice Negotiations

Before escalating to a formal dispute resolution process, it is often wise to initiate "without prejudice" settlement discussions. This is a legal term meaning that anything said or offered during these negotiations cannot be used as evidence or an admission of liability in court if the talks fail. This legal privilege allows for a frank and open commercial discussion aimed at finding a resolution that avoids the significant cost, time, and uncertainty of litigation. It is crucial to have legal representation during this process to ensure any settlement agreement is drafted correctly, is final and binding, and fully protects your interests. If a commercial resolution can't be found, the next step is often resolving matters through QCAT.

Navigating the QBCC's Role in Payment Disputes

When a payment dispute arises in Queensland's construction industry, the first thought is often to involve the Queensland Building and Construction Commission (QBCC). However, it's vital for developers to understand the QBCC's specific role and its limitations, especially concerning complex claims like quantum meruit.

Understanding the QBCC's Jurisdictional Limits

The QBCC's primary mandate, as set out in the QBCC Act, is to regulate the industry. This involves managing licensing and compliance, ensuring builders meet financial requirements, and overseeing the Queensland Home Warranty Scheme. While the QBCC does offer an early dispute resolution service, it is generally designed to handle issues of defective or incomplete work. It is not equipped to adjudicate complex contractual payment disputes like quantum meruit, which require a detailed legal analysis of contract law and the principle of unjust enrichment. These matters typically fall outside its core functions and must be pursued through QCAT or the courts.

Can a QBCC Direction Impact a Quantum Meruit Claim?

A QBCC direction to rectify defective work can indirectly impact a quantum meruit claim. While the QBCC won't rule on the payment dispute itself, its findings on the quality of the builder's work can be used as powerful evidence. If the QBCC inspects the project and issues a formal direction for the builder to fix a list of defects, this officially documents substandard workmanship. A developer can then use this QBCC defect report as leverage, arguing that the "reasonable value" of the builder's work should be significantly reduced to account for the cost of rectification. This can substantially devalue the builder's claim. For specific issues involving the commission, you may need guidance from a QBCC lawyer.

What About the Building Industry Fairness (BIF) Act?

The Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) provides a rapid adjudication process for progress payments under a construction contract. It is designed to keep cash flowing on projects. However, since a quantum meruit claim is, by its very definition, made outside of a contract's payment mechanism, the BIF Act's adjudication process is generally not the appropriate avenue for a builder to pursue such a claim. The claim is not for a "payment claim" as defined by the Act, but for an unquantified amount based on a legal remedy. This distinction is vital for developers to understand their payment rights under the BIF Act and to correctly identify when a builder is misusing the process.

Fortifying Your Next Project Against Ambush Claims

The best defence is a proactive offence. Implementing rigorous project management and risk management strategies from day one can create an environment where quantum meruit claims simply cannot survive. This requires discipline, clear communication, and a commitment to documentation.

Implementing a Strict Communication Protocol

At the start of any project, establish a single point of contact for all contractual matters and formalise the communication chain. Then, implement a non-negotiable "confirm in writing" policy for any site instruction that could have a cost or time implication. This means verbal directions are immediately followed up with a brief email or a formal site instruction notice. This protocol should be communicated clearly to the builder and their site supervisor from day one. This creates a culture of documentation that eliminates the ambiguity and "misunderstandings" that form the basis of most ambush claims.

The Value of an Independent Project Superintendent

For larger or more complex projects, appointing an independent project superintendent or contract administrator is a valuable investment in risk management and due diligence. Their role is to administer the contract impartially. This includes assessing variations, certifying progress claims, and managing extensions of time as they occur, not weeks or months after the fact. Their third-party validation of costs and changes throughout the project's lifecycle creates an official, contemporaneous record. This makes it extremely difficult for a builder to later invent a claim for work that was never properly approved or valued by the superintendent.

When to Seek Proactive Legal Advice

Consider this scenario: midway through a project on the Sunshine Coast, a developer notices the builder is performing work that is clearly outside the agreed scope, citing verbal conversations. The builder is making casual remarks about "sorting out the costs later." Instead of waiting for the ambush, the developer engages a construction lawyer. The lawyer immediately drafts a formal notice to the builder, reminding them of the strict contractual process for variations and putting them on notice that no payment will be made for any unauthorised work. This proactive legal step shuts down the potential for a future quantum meruit claim before it can gather momentum, saving the developer significant time, stress, and money. It illustrates the immense value of early intervention and seeking expert legal advice on construction disputes.

Ultimately, defending against a quantum meruit ambush comes down to control, documentation, and a deep understanding of your contractual rights. By treating every project with rigorous administrative discipline, you can protect your investments from unexpected and unwarranted claims. For a deeper understanding of your legal position, consult the comprehensive guide to building and construction law or contact the team at Merlo Law. This article was prepared with insights from John Merlo.

FAQs

What is the first thing a developer should do when receiving a quantum meruit claim?

Do not admit liability or agree to any amount. Your first step should be to formally request a complete, itemised breakdown of all costs the builder is claiming. Simultaneously, review your contract for clauses relating to variations and gather all your own documentation (emails, site diaries, photos) related to the project.

Can a builder make a quantum meruit claim if we have a fixed-price contract?

Yes, but only in specific circumstances. A quantum meruit claim can arise if the builder performed work that was genuinely outside the contract's scope at your request without a formal variation, or if the contract was wrongfully terminated by you. A strong "written variations only" clause is your best defence against claims for extra work.

How is "reasonable value" determined in a quantum meruit case?

"Reasonable value" is not determined by the builder's invoice. It is assessed based on evidence, which can include the actual costs incurred by the builder (proven with invoices), prevailing industry rates for similar work, and expert opinion from a quantity surveyor. The quality of the finished work is also a factor; defective work is not valued at full price.

Is going to QCAT my only option to fight a claim?

No. Before formal litigation, you can engage in "without prejudice" negotiations or mediation or expert determination to reach a commercial settlement. These alternative dispute resolution methods are often faster and more cost-effective than a formal hearing at the Queensland Civil and Administrative Tribunal (QCAT) or in the courts.

Does the QBCC help with quantum meruit disputes?

Generally, no. The QBCC's dispute resolution service is primarily focused on defective or incomplete work, not complex contractual payment disputes. While their findings on work quality can be used as evidence, they will not adjudicate the quantum meruit claim itself.

This guide is for informational purposes only and does not constitute legal advice. For advice tailored to your specific circumstances, please contact Merlo Law.

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