Vol. 73, No. 2, February 2000

Written Contract
Alternatives

Sometimes words and conduct may be enough to constitute a contract. Learn how to counsel, not console, your client when "it's not in writing."

by Mark Hinkston

any of us have had clients who call when they have not been paid by a customer for work or materials. Some of these clients show up at the initial conference with no documentation, not because they forgot it or could not locate it, but because there was no written agreement from the start.

While written agreements are the ideal, unfortunately some sole proprietors and small business owners do not use them. Many have built their success on a "my word is my bond" credo and a long chain of "handshakes." Some attribute their aversion to written contracting to an inherent trust in their customers, others believe that writing an agreement overcomplicates the process, and some hope to get a lien on the customer's property should problems arise.

If these clients stay in business long enough, it is inevitable that they will get burned by more than one nonpaying customer. When clients come to you hoping to collect, they do not want you to grimace when they say, "It wasn't in writing." You won't have to.

Wisconsin law affords plaintiffs a variety of remedies when they have performed valuable services in contexts where there has been no written agreement. This article focuses on 1) oral agreements, 2) quantum meruit, 3) unjust enrichment, and 4) promissory estoppel. Discerning critical distinctions between each of these remedies can assist your client in recovering for valuable labor and materials, despite the absence of a written agreement. (See Figure 1: Choosing the Appropriate Cause of Action.)

Oral Agreements

Assume the following scenario: "Home" has a house on a large lot that needs extensive lawn care and landscaping services. Your client, "Grass," orally agrees with Home to provide such services over the summer months. The parties agree on the specific items of work to be accomplished and the compensation, but do not reduce the agreement to writing. Imprudently, Grass gets no initial retainer. Home will be on a lengthy overseas trip during this period but assures Grass that he will be paid in full upon his return. Grass fully performs in a professional manner. Home returns from overseas to see an impeccably manicured lot and lawn. But Home greatly exceeded his vacation budget and the funds previously earmarked to pay Grass are gone. Home rebuffs Grass's repeated requests for payment. Grass contacts you to sue.

The first cause of action you should consider is breach of oral contract. Wisconsin law recognizes oral agreements provided there is a definite and certain promise with a meeting of the minds as to essential terms.¹ Grass and Home have a valid and enforceable oral agreement if in fact there was assent as to all material terms. However, do not be surprised if Home tries to extricate himself by alleging that the agreement "wasn't in writing" or it was a mere "agreement to agree."

"It Wasn't In Writing." While the Statute of Frauds² mandates that contracts in a wide variety of contexts must be in writing, for the most part the statute provides no defense in cases involving small projects, because contracts that can be performed within one year need not be in writing.³ Because Grass's time for performance was over the summer months (well under one year), Home's Statute of Frauds defense will fail. Additionally, Grass's performance of the work also vitiates a defense based on the Statute of Frauds because, under the doctrine of "part performance," a court may enforce a contract that does not comply with the statute if the party seeking the contract's enforcement has rendered partial performance.⁴ (Here, Grass has surpassed that threshold by rendering full performance).

Written Agreement Contingency: "Agreement to Agree." A second defense that oral agreement defendants often consider is boiled down as: "We didn't agree to be bound unless and until we both signed a written agreement." In other words, the contention is that there was a mere "agreement to agree" and the contractor should not be paid since he imprudently performed work before an agreement was signed.⁵

To ascertain the success of this attempted defense, there are two possibilities to consider. First, determine if during negotiations the parties considered the details of the anticipated agreement, discussing and settling them one by one, with the understanding that their agreement was to be embodied in a formal written document and that neither party was to be bound until the document was executed.⁶ For example, perhaps Grass and Home discussed the proposed services but Home told Grass that it was contingent on Home's review and written acceptance of a written proposal from Grass prior to any work being commenced. If Home leaves on his trip having failed to execute a written acceptance of the proposal, Grass commences the work at his own risk and likely will lose on a claim for breach of oral contract.

Second, determine if the parties had come to an oral agreement binding in itself even though it was anticipated that a written agreement embodying its terms afterwards would be signed.⁷ In other words, the parties may have had a definite and certain proverbial "handshake" agreement and intended that it was binding regardless of the written memorialization to follow. You must sift and winnow the facts to ascertain which category applies to your client's situation.

In summary, for those who have entered into a definite and specific oral agreement to perform services within one year, where there has been no intent to sign a predicate written agreement, recourse may be had under Wisconsin law for breach of oral contract.

Quantum Meruit versus Unjust Enrichment

Sometimes orally contracting parties do not go far enough in their discussions, neglecting to agree on all of the material terms. In cases where an oral contract may fail for indefiniteness as to a material term, such as compensation, or because it succumbs to one of the other defenses discussed above, one should consider a remedy in the form of either quantum meruit or unjust enrichment.

Distinct Remedies. Many lawyers mistakenly lump quantum meruit and unjust enrichment together and use the terms interchangeably.⁸ Yet the remedies are separate and distinct.⁹ Quantum meruit, Latin for "as much as he deserves," involves mutual assent. The remedy is commonly known as "implied-in-fact contract." Under this theory a plaintiff is allowed to recover the reasonable value of the services.

With unjust enrichment, also called "quasi-contract" or "implied-in-law contract," "there is no contract in fact but the parties will be treated under the circumstances as if there had been a contract."¹⁰ With unjust enrichment, restitution is awarded based on the benefit received by the defendant.

In short, quantum meruit (implied-in-fact contract) is based on mutual assent, with damages based on the value of the services. Unjust enrichment is based on justice and equity under circumstances where there has been no mutual assent, with restitution based on the benefit received by the defendant. (See Figure 2: Distinguishing Claims and Remedies.)

Implied-in-Fact Contract (Quantum Meruit): The Prima Facie Elements. To recover under this theory, a plaintiff must show that: 1) the defendant requested services, 2) the services were performed, and 3) the services were valuable.¹¹ Unlike an express written or oral agreement, proof is circumstantial (hence the name "implied-in-fact contract"). A plaintiff must prove that the parties, "by their words, their conduct, or course of dealing, came to a mutual agreement."¹² Proof of the prima facie elements creates a "rebuttable presumption that the parties mutually intended fair payment."¹³ In the lawn care hypothetical previously discussed, assume that Home requested the lawn services and Grass performed, but no specific price was discussed. Grass still could recover under an implied-in-fact contract theory and recover the reasonable value of his services, provided he proffers sufficient proof as to "reasonable value."

A lodestar case on implied-in-fact contracts is Wojahn v. National Union Bank,¹⁴ in which the Wisconsin Supreme Court recognized a plaintiff's recovery under that theory for services provided in supervising one of the bank's debtors. There was no written agreement and the plaintiff had not even submitted a bill for his services nor demanded payment prior to commencement of suit. The court recognized the general rule that "if a person performs valuable services for another at that other's request, the law implies, as matter of fact, the making of a promise by the latter and acceptance thereof by the former to pay the one performing the service the reasonable value thereof."¹⁵

Subsequent to Wojahn, Wisconsin appellate courts have considered implied-in-fact contracts in a wide variety of contexts. Some of the more fertile areas include claims for services rendered by close relatives or coinhabitants,¹⁶ services performed by experts at the behest of an attorney on behalf of a client in and out of a litigation context,¹⁷ and services by consultants,¹⁸ architects,¹⁹ and contractors or subcontractors.²⁰

Supporting Proof as to "Reasonable Value." Obviously, a court will not randomly attribute a value to whatever services a plaintiff performed or blindly accept a plaintiff's generalization or estimate as to the value of services. A plaintiff should not rely on "guesswork"²¹ or cobble together a post hoc estimate based on noncontemporaneous notes or mere recollection.²² One should be prepared to present specific evidence, whether invoices or other documentation, reflecting the rate and amount of time spent on the project. Depending on the nature of the claim and services, it also may be necessary to proffer evidence as to the customary rate for such services in the community.²³ If a plaintiff in a quantum meruit action merely generalizes the amount of time spent on a project, he or she will lose. (For example, it is not advisable for Grass to testify when asked how much time he spent on the project, "I think somewhere between 20 and 100 hours").²⁴

Unjust Enrichment: The Prima Facie Elements. "Mutual assent," the foundation of an implied-in-fact contract (quantum meruit) claim, is absent from a viable claim for unjust enrichment. Unjust enrichment does not apply where the parties have entered into an express contract.²⁵ (Hence, it is somewhat of an illusion to refer to unjust enrichment as "quasi-contractual" in nature or label it a claim for "implied-in-law contract").

To succeed on a claim for unjust enrichment, a plaintiff must show that: 1) he or she conferred a benefit, 2) the defendant had knowledge or appreciation of the benefit, and 3) it would be inequitable for the defendant to retain the benefit without paying plaintiff its value.²⁶ Merely because a plaintiff has expended time and resources on a project does not automatically entitle the party to recovery under unjust enrichment.²⁷ Because the focus in an unjust enrichment case is on the benefit received from the plaintiff, a claim is not stated where no benefit has been conferred²⁸ or where the services are a gift.²⁹

Reverting to our hypothetical, suppose Home left for his extended vacation without having spoken with anyone about caring for his lawn during his absence. Imagine Home's surprise months later when he discovers that some kind soul mowed his lawn while he was away. Yet imagine his shock when he discovers that the same person (Grass), without notice to Home, chopped down several majestic trees on Home's property. Imagine Home's further shock when Grass later arrives to introduce himself and presents Home with a hefty invoice for lawn care and tree-cutting services, services which Home did not request or expect. Grass realizes his mistake (he got the wrong address), but has the audacity to insist that Home was benefited by his "valuable" services. Home disagrees. Grass later sues on a claim for unjust enrichment.

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