Sunday, February 24, 2013

Liens versus breach of contract.

The last few days I wrote about about liens. If you hold a mechanic's lien, agricultural lien or harvester's lien, there are likely other methods of obtaining payment from someone who is wrongfully withholding it. You may be able to file a claim for breach of contract or quantum meruit. To file a breach of contract claim, there must be an express or implied contract. In cases where you perform work that entitles you file a lien, you may also be able to file a claim for breach of contract. If you do not have a written contract, it would be more difficult to prove the existence of an implied contract and its breach, as opposed to the value of the services you provided.

Quantum meruit is a legal term simply meaning that if you do not have a contract but provided a benefit to another, you can recover the reasonable value of the services provided. You are able to recover the same amount as with a lien -- the reasonable value of the services provided -- but the recovery does not attach to property like a lien.

These rights are not mutually exclusive. It may be prudent to file a lien, breach of contract claim, and for quantum meruit. Generally, the legal procedure of bringing all three claims can be a bit complicated. First, you have to file the lien, perfect it, and file a petition to foreclose it. Depending on the jurisdiction in which you live, you may not be able to bring any claims along with the petition to foreclose the lien. Second, you would file a petition for breach of contract and quantum meruit. Third, you would file a motion to consolidate the cases, which would likely be granted. If your jurisdiction allows you to include other claims in a petition to foreclose a lien, then you could include all three claims in one petition.

Sometimes it may not be prudent to assert all three rights of action. If you have a contract worth $50K but reasonably performed only $20K worth of work, you could stand to make more money by claiming breach of contract. If you have a contract worth $50K, but the reasonable value of the services you provided was $75K, you could make more money by filing a lien.

If you clearly have a contract, you would not likely have a strong case for quantum meruit. That remedy is available when there is no contract. In the last example, the opposing party would likely assert a counterclaim for breach of contract, so the opposing party would attempt to limit your recovery to $50K. It would be a fairly difficult case requiring a lot of evidence and testimony regarding the amount you should recover: $50K, $75K, or nothing. But those are just some considerations you should make if you performed work but did not get paid.

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