Image: iosphere/FreeDigitalPhotos.net
If you take an unreasonable position and refuse to pay for services that were rendered, you should be prepared to have a court rule against you.
And that's exactly what happened in John Anthony Rubino & Co. CPA v. Schwartz (a trial court decision that previously appeared on the pages of the New York Law Journal, and which was later affirmed on appeal).
In Rubino, the plaintiff-accountant was retained to prepare financial projections for a proposed business venture. And he did it. But when the defendant abandoned the project, he contended that he didn't owe the plaintiff any money, because he only agreed to pay the plaintiff if the project went through.
Not surprisingly, the plaintiff-accountant had a different understanding; he believed that he was going to be paid for the work he did whether the project went through or not. Since there was no written contract, and the parties clearly did not have the same understanding (in legalese, a "meeting of the minds"), the Court was constrained to dismiss the plaintiff's breach of contract claim.
So, that was the end of it, right? No contract, no recovery?
Not quite.
Your Subjective, Unreasonable Belief That You Don't Need to Pay for Services Rendered Won't Fly
Despite the lack of a written agreement, the Court held that the plaintiff was still entitled to recover the reasonable value of the services that he rendered, which in legal terms is called "quantum meruit," (and occasionally, "unjust enrichment") because the Court held that the defendant's purported belief that he should not have to pay the accountant unless he decided to pursue this business venture went through was unreasonable as a matter of law.
Here's what the trial court stated:
"In the context of reasonableness, the court finds that Mr. Rubino's expectation payment for services at his regular hourly rate was reasonable. Dr. Schwartz's expectation that Mr. Rubino would only be paid for his services if the project was successful in attracting investors was unreasonable.
"It is based on an assumption that Mr. Rubino's payment for hourly services would be based on assuming all the risks of loss (no investors) but none of the benefits of success (no ownership interest in the business created)."
(Emphasis supplied).
The moral of this story should be fairly obvious:
Just because you don't have a written contract doesn't mean that you can't recover your losses.
