Quantum Meruit: How You (Sort of) Sue for Breach of Contract in Tennessee, When There’s No Written Contract

When you’re buying, selling, lending, or anything else in between, take the time to prepare a written agreement, spelling out the terms of what you’re agreeing to do and of what the other side is agreeing to do in exchange.  Get it in writing and get it signed.

Everybody knows this, but, regardless, sometimes you don’t get it in writing. Maybe the deal is rushed. Maybe you think it’s such a clean transaction that it doesn’t need to be complicated by a written agreement. (By the way, this advice applies for lawyers and engagement letters–oh boy, have I learned that lesson.)

Where there’s not a written agreement, you don’t have a “contract” claim against the other side; you have what is called a “quasi-contract” claim. Instead of suing under a contract, you’re suing under equity–it’s not fair for the other side to benefit from your performance.

The theory is referred to as “quantum meruit” or “unjust enrichment.” The Tennessee Court of Appeals very recently revisited the elements of a Tennessee quantum meruit claim. The Court stated:

Under a quantum meruit theory, a party may recover the reasonable value of goods and services provided to another if it demonstrates that:

(1) There is no existing, enforceable contract between the parties covering the same subject matter;

(2) The party seeking recovery proves that it provided valuable goods or services;

(3) The party to be charged received the goods or services;

(4) The circumstances indicate that the parties to the transaction should have reasonably understood that the person providing the goods or services expected to be compensated; and

(5) The circumstances demonstrate that it would be unjust for a party to retain the goods or services without payment.

In the end, even without a written agreement, equity will dictate that a party should recover the value of the goods or services from a non-paying party.

Because there’s no contract, however, you lose the typical “contract” protections, like attorney fees, interest, and, frankly, the certainty of being in control over the terms of your deal. Take the time on the front end to document your deals; as a result, you’ll save time and money on the back end, arguing over what each party claims the terms of the deal were.

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Attorneys Fees Can be Recovered in a Tennessee Lawsuit, but only if the contract or statute allows them

I always tell clients that Tennessee is a creditor friendly state, and it is. But, just because it’s fair to creditors, that doesn’t mean a Tennessee Court will give a plaintiff everything.

I’m talking today about attorney fees. The general rule in Tennessee is that, unless you have an agreement in writing that you are entitled to recover your attorney fees, a court will not award those fees to you.

Here’s why: Tennessee follows the “American Rule” on awarding attorney’s fees which states that “a party in a civil action may recover attorney fees only if: (1) a contractual or statutory provision creates a right to recover attorney fees; or (2) some other recognized exception” applies. Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303, 308 (Tenn. 2009).

The contract provision allowing attorney fees to be recovered has to be very specific. In the Cracker Barrel case, the contract at issue provided that the prevailing party should recover “all costs and expenses of any suit or proceeding.” The Tennessee Supreme Court held that this language was not specific enough to award attorney fees (instead, it allowed recovery of court costs and litigation expenses).

This is an important issue, as the ability to recover your expenses and costs as part of your action will be a big consideration in any decision to file a lawsuit. Lawyers are expensive. Keep that in mind on the front end, when you’re preparing a contract or agreement, and get very specific text allowing for recovery of attorney fees.