I have business connections so I can get the lumber for the derrick; such things go by friendship in a rush like this.” As There Will Be Blood’s Daniel Plainview (Paramount Vantage 2008) suggests, business opportunities come unexpectedly and often agreements to supply materials and labor must be made quickly. Such exigencies often pressure clients into performing even in the absence of an enforceable written contract. Following the completion of the project, the client often looks for but is denied compensation because no contract outlines the parties’ rights and obligations.
Fortunately, the client still has methods of obtaining relief and compensation for the work accomplished. In these circumstances, an attorney may seek relief for his client by arguing that a quasi-contractual relationship existed. Even without a contract, a court may nonetheless find an obligation to pay existed so as to prevent an injustice.1 To seek this relief, an attorney must argue under the similar yet distinct theories of Quantum meruit and unjust enrichment, or demonstrate the client’s detrimental reliance by arguing under the doctrines of promissory estoppel or equitable estoppel. This article will detail the distinction between quantum meruit and unjust enrichment, and explain how the cause of action of promissory estoppel differs from equitable estoppel.
Quantum Meruit and Unjust Enrichment Defined. The term quantum meruit translates to “what one has earned.” An action for quantum meruit seeks to recover “the reasonable value of work and material recovered” and is often pleaded even when a contract does exist, just in case the contract is found to be unenforceable.2
A successful claim under quantum meruit will include proof that: (1) a beneficial service was provided to defendant; (2) the service performed was not gratuitous; (3) the service was accepted; and (4) there was no written contract detailing the rights and obligations of the parties.3 The party asserting quantum meruit has the burden to establish damages.4 The proof required must be specific enough to show the value of the services and materials rendered.5
Consider Keno and Sons Construction v. La Salle National Bank.6 In Keno, the Second District of the Illinois Appellate Court found the plaintiffs failed to prove an adequate measure of damages by presenting the court only with a bill of service.7 The bill failed to break down the value of the material furnished.8 Without detailed proof of materials and services, a court may be unable to provide relief, as plaintiff would fail to provide a basis for damages.9 Be mindful, however, that damages from quantum meruit are not solely derived from plaintiff’s expenditures. Instead, damages should reflect the amount the court determines defendant was enriched by way of plaintiff’s efforts.10 Generally, a court’s award of damages under quantum meruit will be the lesser of the cost incurred by plaintiff in providing a benefit or the economic enrichment received by defendant.11
Unjust enrichment, though similar to quantum meruit, may provide an alternative argument for relief. “An unjust enrichment action focuses on the benefit received and retained as a result of the improvement made by a contractor.”12 A proper plea for unjust enrichment includes (1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment and impoverishment, (4) lack of justification, and (5) no remedy provided by law.13
When pleading unjust enrichment, it is of the utmost importance to plead facts that highlight the unjust nature of defendant’s retention of the benefit.14 In Hayes Mechanical Inc. v. First Indus., L.P., the court stated that although First Industrial may have benefitted from Hayes’ labor, Hayes needed to plead specific facts showing why retention of the benefit would be unjust. Hayes’ inability to show any improper conduct by the enriched party allowed the court to dismiss the action and deny Hayes’ attempt to amend the complaint.15
Unjust enrichment slightly differs from quantum meruit in its measure of damages. Unjust enrichment “focuses on the benefit received and retained as a result of the improvement provided by the contractor.” 16 That is, the calculation of damages does not solely derive from plaintiff’s expenditures, but instead looks to defendant’s retained benefit. Arguably, if plaintiff provided labor and material valued at $100 and such work allowed defendant to unjustly receive a benefit of $1,000, plaintiff arguing under unjust enrichment could recover an amount larger than the $100 expended.
The gravamen of quantum meruit and unjust enrichment is the improper retention of a benefit. In such situations, courts will step in even when no contract existed because one party has gained at the expense of the other. Going further, courts will also provide a remedy in the absence of contract when a party’s damages occur from detrimentally relying on the representation of another. To that end, courts have developed the doctrines of promissory and equitable estoppel.
Promissory and Equitable Estoppel Defined and Distinguished. While most attorneys encountered promissory estoppel early in law school, the topic is not without some convoluted history. The Illinois Appellate Court recently waivered about whether or not promissory estoppel may be used as a cause of action or merely as a defense.17 In 2009, the Supreme Court of Illinois set matters straight, authoritatively stating that “promissory estoppel is a proper vehicle for direct relief ”18 when plaintiff lacks a contract.19 A plaintiff may find relief upon proving (1) defendant made an unambiguous promise to plaintiff, (2) plaintiff relied on that promise; (3) plaintiff’s reliance was foreseeable by defendant; (4) the reliance was detrimental to plaintiff.20 While promissory estoppel may have originally been used in Illinois to enforce gratuitous promises and charitable subscriptions, the Supreme Court has left no doubt the doctrine has been expanded to include defective contracts and preliminary negotiations.21 In other words, a prerequisite for promissory estoppel is the non-existence of a contractual relationship.
Promissory estoppel is a decided method of recovery; however, the amount recovered may vary. As the Supreme Court of Illinois noted, promissory estoppel warrants either “full-scale enforcement by normal remedies” or partial enforcement.22 It does not exist to create and specifically enforce a contract that never existed.23 The relief granted should align with the detriment suffered from relying on the defendant’s promise.24 The purpose of the equitable relief granted by the court is to return plaintiff to the prereliance position.25
Newton Tractor Sales, Inc. v. Kubota Tractor Corp. refers to Wisconsin precedent to illustrate a quintessential promissory estoppel scenario. There, a plaintiff hoping to open a grocery store entered into negotiations with the salesman of a grocery store chain. In reliance upon the salesman’s promise that the parties were “all set”, plaintiff sold his current store and prepared to relocate. The deal ultimately fell through and plaintiff lost out on the profits his store would have made. Importantly, the Supreme Court approvingly cited the relief provided by the Wisconsin court. Despite the lack of a contract, plaintiff was still entitled to relief due to his detrimental reliance on another’s promise. However, relief was limited to the costs spent and profits lost from closing and relocating his business.
While promissory estoppel has shined in Illinois as a cause of action under the Supreme Court’s spotlight, equitable estoppel has been left gathering dust in a gaffer’s closet. Equitable estoppel is most commonly thought of as an affirmative defense, but nothing bars a plaintiff from pleading equitable estoppel and carrying the burden of proof. 26 In fact, equitable estoppel is a doctrine that should be invoked to prevent fraud and injustice.27 Equitable and promissory estoppels greatly overlap, but a subtle distinction exists between the two causes of action. Equitable estoppel, unlike promissory estoppel, does not require a promise; rather, a party’s actions or inactions form the basis of reliance. This distinction provides another avenue of relief for a client when her damages occur from reliance on something other than a promise. After considering all the circumstances of a specific case, equitable estoppels may apply if conscience and honest dealing require that a party be estopped.28
Apart from the equitable maxim above, courts require a party seeking to establish equitable estoppel to show: (1) a misrepresentation or concealment of material facts, (2) knowledge the representations were untrue, (3) the party claiming estoppel was not aware of the untruth, (4) an intent or reasonable expectation that action would be taken based upon the misrepresentations, (5) detrimental reasonable reliance on the misrepresentation, and (6) prejudice to the party claiming estoppel if the person supplying the misrepresentation may deny the truth.29 The proponent must prove each element by clear and convincing evidence.30
A quick comparison of the elements of promissory and equitable estoppel will reveal their similarities. In fact, these two causes of action are so similar that at times each is confused by attorneys and the judiciary.31 The notable distinction is that “[w]hile promissory estoppel requires proof of an unequivocal promise, equitable estoppel does not.32 At times, however, the practical difference between the two versions of estoppel is negligible.33 One set of facts often meets the elements of both causes of action; nonetheless, an attorney should be prepared to distinguish between the two. 34 For instance, equitable estoppel may be a more appropriate pleading when parties deny the existence of contract despite availing themselves of some benefit.35 While equitable estoppel certainly will be more frequently used as an affirmative defense or to prevent another party’s denial, the situation may arise where acts other than a promise cause plaintiff’s detrimental reliance. Schwinder v. Austin Bank of Chicago provides such a scenario.36
In Schwinder, plaintiffs hoped to purchase defendant’s condominium, but complications from a divorce proceeding delayed the closing.37 Without a closing occurring, defendant allowed plaintiffs to move into the condominium, repaired items on plaintiffs’ punch-list, and obtained an agreed order removing the injunction delaying the closing.38 The defendant, despite holding plaintiffs’ earnest money, refused to close on the property.39 Plaintiffs relied on defendant’s actions so as to believe a closing would occur. Defendant’s actions induced plaintiffs to move into the residence, repair and improve the unit, and withdraw money from their 401k for a down payment despite incurring withdrawal penalties.40 The court found that estoppel must be invoked in this case to prevent plaintiffs from suffering a formidable injustice.41 In the hopes of remedying injustices, courts fashion equitable estoppel remedies in step with promissory estoppel remedies, allowing relief for costs and losses incurred from the detrimental reliance.42
Conclusion. Parties without written contracts are almost certain to come into dispute. Importantly, the lack of a contract does not foreclose relief. The law recognizes that duties and obligations exist outside a contractual relationship. These obligations, though disputed by the parties, may be implied by the law to prevent an injustice. It is important to know when a client has no breach of contract action viable alternatives exist to provide relief. Foremost among these alternatives are the theories of quantum meruit, unjust enrichment, promissory estoppel, and equitable estoppel.
1 Hayes Mechanical Inc. v. First Indus., L.P., 351 Ill. App. 3d 1, 8, 812 N.E.2d 419, 426 (1st Dist. 2004)
2 Id. at 10.
3 Cove Mgmt. v. AFLAC, Inc., 2013 IL App (1st) 120884, 986 N.E.2d 1206, 1215 (1st Dist. 2013).
4 Keno & Sons Const. Co. v. La Salle Nat. Bank, 214 Ill. App. 3d 310, 312, 574 N.E. 2d 151, 153 (1st Dist. 1991)
10 Midcoast Aviation, Inc. v. Gen. Elec. Credit Corp., 907 F.2d 732, 745 (7th Cir. 1990).
12 Hayes Mechanical Inc.,351 Ill. App. 3d at 8.
13 Sherman v. Ryan, 392 Ill. App. 3d 712, 735, 911 N.E.2d 378, 399 (1st Dist. 2009)
14 Hayes Mechanical Inc., 351 Ill. App. 3d at 9.
15 Id. at 13-14.
17 The Journal of the Du Page County Bar Association, Promissory Estoppel in Illinois: What on Earth is Going On? (2008) available at http://www.dcbabrief.org/vol181105art2.html
18 Newton Tractor Sales, Inc v. Kubota Tractor Corp., 233 Ill.2d 46, 54, 329 Ill. Dec. 322 (2009).
19 Id. at 325-26.
22 Id. at 329.
23 Id. at 330.
24 Id. at 329.
25 Id. at 330.
26 Payne v. Mill Race Inn, 152 Ill. App. 3d 269, 276, 504 N.E.2d 193, 198 (2nd Dist. 1987).
28 Gold v. Dubish, 193 Ill. App. 3d 339, 348, 549 N.E.2d 660, 664 (5th Dist. 1989).
29 Steinmetz v. Wolgamot, 2013 IL Ap (1st) 121375, 995 N.E. 2d 338, 349 (2013).
31 Brook, Weiner, Sered, Kreger, & Weinberg v. Coreq, Inc., 91 C 7955, 1994 WL 444798 (N.D. Ill. Aug. 5, 1994).
32 Gold, 193 Ill. App. 3d at 348.
35 Steel City Nat. Bank of Chicago v. J.J. Wright Oldsmobile, Inc., 192 Ill. App. 3d 926, 933, 549 N.E.2d 726, 730 (1st Dist. 1989).
36 Schwinder v. Austin Bank of Chicago, 348 Ill. App. 3d 461, 472, 809 N.E.2d 180, 192 (1st Dist. 2004)
42 Gold, 193 Ill. App. 3d at 351.
Patrick R. Boland graduated from the University of Illinois at Urbana-Champaign. After establishing a career as a teacher, Patrick attended The John Marshall Law School, graduating in 2013. Patrick is currently employed as an attorney at Momkus McCluskey, LLC in Lisle, Illinois and practices general civil and commercial litigation.