Newsletters: Construction

Conflict Among Illinois Appellate Courts Regarding Quantum Meruit Relief for Contractors Who Fail to Comply with the Illinois Home Repair and Remodeling Act

November 16, 2009

Most of you will at some time have reason to engage a contractor to perform repair or remodeling work with respect to your residence. In Illinois, such work is subject to the provisions of the Illinois Home Repair and Remodeling Act (815 ILCS 513/1 through 999) (the "Act"). The Act requires, among other things, that before a contractor may perform any home remodeling or repair work the cost of which will exceed one thousand dollars, the contractor must, among other things, first obtain a signed contract or work order from the homeowner, and must deliver to the homeowner a copy of a statutorily prescribed pamphlet entitled "Home Repair: Know Your Consumer Rights."

Several recent decisions by various Illinois Appellate Court districts have addressed the right of a contractor to receive compensation for its work if the contractor fails to comply with the provisions of the Act. In one instance, a court has ruled that the failure of a contractor to comply with the Act means that the contractor is not entitled to any compensation (infra). However, two other appellate courts have ruled that a violation of the Act by a contractor does not prevent the contractor from recovering the fair value of the enhancements provided by the contractor (infra). We feel it will be helpful to our clients residing in Illinois who are contemplating repair work or remodeling work to their homes to understand the conflict among the Illinois appellate courts regarding this issue.

In Smith v. Bogard, 879 N. E.2d 543, 377 Ill. App. 3d 842 (4th District, 2007), a contractor who, prior to the commencement of remodeling work, had failed to obtain a signed contract from a homeowner, and had failed to deliver the requisite consumer rights pamphlet to the homeowner, sued the homeowner for the unpaid contract price. The contractor claimed that, even if it had violated the Act, the contractor was still entitled to recovery on the theory of quantum meruit (unjust enrichment), and that to allow the owner to receive the benefit of the work without paying for such work would be inequitable. The appellate court for the fourth district, reading the requirements of the Act strictly, denied the contractor any right to the unpaid portion of the contract price.

In a subsequent case, K. Miller Construction Co., Inc. v. McGinnis (First District, Doc. No. 1-08-2514, 2009), the appellate court for the first district took a different view. In Miller, a contractor had failed to obtain a signed contract from homeowners prior to the commencement of remodeling work. One of the homeowners was a lawyer. The contractor filed a complaint for breach of an oral contract, foreclosure of a mechanic's lien claim, and quantum meruit. The court found no merit in the contractor's oral contract claim or in the contractor's mechanic's lien claim. However, the court conducted a lengthy analysis of the quantum meruit claim. The court framed the issue as "whether the legislature's declaration that oral contracts falling under the Home Repair Act are 'unlawful' means that the equitable remedy of quantum meruit is foreclosed in an action between a well-established contractor and a sophisticated consumer (a lawyer), where no allegation is made that the contractor engaged in anything other than a fair and honest practice, and where, based on the allegations of the complaint, the contractor took out a construction loan to complete the project, which, after a 'walk-through,' was approved by the consumer." The court then specifically rejected the fourth district's decision in Smith, and ruled that "quantum meruit remains an equitable remedy available under the Home Repair Act." In so doing, the first district emphasized that it found no evidence that the legislature intended the Act to repeal the common law remedy of quantum meruit, or any evidence that the contractor had acted fraudulently or in bad faith by failing to deliver a written contract. The court noted that "[t]he 'wrong Miller committed was not directed at the McGinnises, but joined in by them. In fact, it may well be that a consumer with Mr. McGinnis' background may be inclined to join in such a 'wrong' to gain an unjust enrichment from an honest, but uninformed, contractor." The court also stated that it was not convinced that allowing a quantum meruit claim would defeat the entire purpose of the Act, as was claimed by the homeowners. Note that, notwithstanding the Miller court's insistence that it was "not fairness that drives our decision," the language in the opinion suggests that the court felt it would have been unconscionable to allow Mr. McGinnis, a real estate lawyer with thirty-five years of experience, to take advantage of a strict construction of the Act to reap a windfall.

Nevertheless, in a subsequent case, Artisan Design Build, Inc. v. Bilstrom (2nd District, Doc. No. 2-08-0855, 2009), which did not involve a lawyer, the second district elected to follow the reasoning of the first district in Miller rather than the reasoning of the fourth district in Smith. In Artisan, a contractor failed to deliver the requisite consumer rights brochure to an owner prior to the commencement of a remodeling project. The contractor filed a complaint to foreclose its mechanic's lien claim and for other relief, including an order compelling the owner to pay the unpaid portion of the contract price on the basis of unjust enrichment. The court in Artisan distinguished the facts in Artisan from the facts in Miller on the basis that Miller involved both a failure to deliver the consumer rights pamphlet and a failure to enter into a written contract. Yet, the court in Artisan adopted the position of the court in Miller, and permitted the contractor to recover the unpaid contract price.

Ultimately, the Illinois Supreme Court may need to resolve the divergent decisions of the fourth district, on the one hand, and the first and second districts, on the other. However, given that the pro-contractor decisions in Miller and Artisan came after the harsher Smith decision, the judicial trend in Illinois may be to permit a contractor who violates the Act to prevail on the basis of quantum meruit.

If you have any questions, please feel free to contact either Gary Scott Saipe (gsaipe@bupdlaw.com) or Michael J. Delrahim (mdelrahim@bupdlaw.com).