Coping with Failure? Re-Appraising Pre-Contractual Remuneration

Abstract:     
This paper analyses the circumstances in which a party to contractual negotiations has been held to be entitled to claim remuneration for work done when the negotiations ultimately fail, or where the anticipated contract fails to come into being for some other reason. The criteria used by courts are notoriously difficult to pin down with any precision in this context and there is also a high degree of uncertainty as to which model of liability – contractual, tortious, equitable or restitutionary – is appropriate as a response to failings of this type.

The paper comprehensively details the possible liability models that might apply in such scenarios, considering their advantages and disadvantages (Part 1). It then reviews a variety of appellate and lower court decisions which have recently considered the issue (Part 2); and makes three suggestions for reform which will enable courts to move to a clearer set of solutions (Part 3). These include the abolition of the language of the old forms of action (quantum meruit); the clear recognition of a distinction between legal and evidential criteria for recovery; and an expanded definition of 'benefit' for the purposes of restitution actions based on unjust enrichment.

When these reforms are made, it is suggested that the existing multiple-model set of solutions is workable; and holds more promise that any single model which seeks to redistribute gains and losses on a discretionary basis. A significant advantage of restitutionary solutions based on the unjust factor of failure of consideration is identified as being that no investigation is required by a court into the 'relative fault' of the parties or their good or bad faith in respect of the precise reasons for the breakdown in negotiations.

Number of Pages in PDF File: 26

Keywords: Quantum Meruit, Remuneration, Incomplete Contracts, Restitution

working papers series