An enforceable obligation to pay may exist even in the absence of a formal agreement.
Being able to collect money that is owed to you requires a basic understanding of contract law. Even in circumstances where no formal contract exists, you may still have a legally cognizable cause of action that will allow you to obtain an enforceable judgment. The key is to recognize the types of situations from which a collectable claim can arise.
Contract Situations
A simple contract is made when one party offers to do something and the other party pays (or offers to pay) in exchange. For example, you offer to paint John's house and John agrees to pay you. The terms of this contract are not complex, as we have a promise (your offer to paint) plus consideration (John's agreement to pay). Everyone understands what is expected of him, and once John pays, the contract requires you to paint John's house.
Remedies for Breach
A breach of contract occurs when either of the parties fails to perform. John might fail to pay, or you might fail to paint. The remedies available to the parties will depend on several factors, primary of them being detrimental reliance. If you actually painted John's house, your performance of your end of the contract means you acted in reliance on John's promise to pay. In other words, you are in a position of having relied, to your detriment, on John, and having done so puts you in a strong position when it comes to collecting from John for his breach of contract. Your remedy, in this case, is to collect your pay from John.
Defenses Against a Contract Claim
John may argue, however, that there was no contract. He never actually agreed to hire you; instead, he was merely expressing a wish that he could, at some point, have his house painted. This situation is particularly troublesome where no written contract exists. Either party could deny the existence of an enforceable agreement. If there is no contract, then there is nothing to enforce. In this situation, determination of whether a collectible claim exists will be based on examining whether the actions by both parties have resulted in inequity to one of them.
Unjust Enrichment
Where John denies the existence of an enforceable contract, your remedy is to ask the court to examine the equities of the situation. John does not deny that the two of you spoke about painting his house; he merely claims there was no contract. You, in turn, can point to the fact that John's house has been painted. He has, in legal terms, been unjustly enriched by your actions. This is where the doctrine of promissory estoppel comes into play. Regardless of whether you can produce an actual document containing the terms of your agreement with John, you can testify that John promised payment, and relying on that promise, you painted his house. His statements to you create a situation in which he is estopped from denying his responsibility to pay.
Remedies for Promissory Estoppel
Here is the difference between breach of contract and promissory estoppel. Whereas the existence of an actual contract allows you to collect exactly what was agreed on, a cause of action alleging promissory estoppel may only permit you to collect the actual value of the work you performed, and in some circumstances, no more than the actual money you invested to perform the work. In other words, you may only be able to collect for the cost of materials you purchased. It may well be that you can collect the full amount of what John promised, but you will need to prove, through expert testimony, the value of work you performed in order to collect from John.
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