Reasonable price in open price service contract

Question

There is a service contract with no price defined. Does that means the price must be "reasonable"? This is true in Universal Commercial Code but it covers only sales of goods, not services. Is there a provision in common contract law for "price should be reasonable" if the price is not specified in the contract?

Answer 1

united-states

Usually, in the absence of some agreement on price, the contract would be determined to have not been formed for lack of a meeting of the minds, unless something else in the context of the transaction (e.g. a standard schedule of compensation for services that is almost always used in that industry or setting for the services rendered) that provides a reasonable way of ascertaining the intent of the parties.

But, often, a person who provided services with a reasonable expectation of being paid would be entitled to the fair market value of their services on a non-contractual quantum meruit theory, which is based upon unjust enrichment and detrimental reliance, rather than based upon the agreement of the parties.

For example, suppose that I asked some painters to paint my house, and they agreed to do so and provide me with a form contract without the price term filled in. Then, they start doing the work and complete it with my knowledge and without my objection, even though no price had been agreed upon. There would be no valid contract. But the painters would be entitled to quantum meruit compensation for their work at the fair market value for the work done.

As another example (although not one within the scope of the question's facts), quantum meruit is the common law basis upon which hospitals and medical professionals who provide emergency medical treatment to an unconscious patient, without approval from a medical power of attorney agent, are entitled to compensation, in the absence of any statute providing for their compensation.

These cases should also be distinguished from the case where there is a form contract for services, and there is a method for determining the price that is due for the work in the contract (e.g. a health insurers contract with a hospital that references the most recent Medicare reimbursement work for the medical services provided), even though the price is not actually spelled out in the contract. In those cases, the contract is valid and would be carried out according to its terms, even if there was a dispute over what the correct price of the services rendered was that a court would have to resolve.

The reasonable price provision in the Uniform Commercial Code is basically simplifying this quantum meruit analysis by statute (contrary to the common law of contracts), in the simple case of a sale of goods contract where the seller and buyer regularly do business with each other and have a form contract that they have agreed upon for such sales.

Answer 2

There is no contract

australia

The agreement must provide sufficient detail that the price can be determined in order to be a contract. In the case of goods, the various state Sale of Goods Acts will step in to complete the contract, typically by requiring a reasonable price. However, this is not the case for a contract for services. In addition, if the agreement is about the supply of goods and services to a consumer under the Australian Consumer Law, failure to communicate a clear price is an offence.

Note that it is not necessary to specify the price exactly but there must be a mechanism by which the price can be determined without the parties needing to make a further agreement on the matter. So, unit prices are fine. So are prices that vary based on a measurable quality or even a price that will be determined by a nominated third party.

Where the charging party has come into the situation where a price cannot be determined without “clean hands”, the court may award them a reasonable price on a quantum meruit basis, however, as an equitable remedy, this is at the discretion of the court. This will almost surely fail for a consumer contract since, by committing an offence, the vendor does not have clean hands.