Court Orders General Contractor To Pay Sub-Subcontractor

By: Bruce H. Schoumacher - Querrey & Harrow, Ltd., Chicago

March 2, 2015

In a recent case, the Illinois Appellate Court instructed a general contractor to pay a sub-subcontractor for work performed by the sub-subcontractor for the project even though the general contractor did not have a contract with the sub-subcontractor. C. Szabo Contracting, Inc. v. Lorig Construction Co., 2014 IL App (2d) 131328. This case is significant because most often the Illinois courts deny payment to the sub-subcontractor under such circumstances.

Sometimes, the owner may not pay the general contractor or the general contractor may be paid by the owner, but the general contractor does not pay its subcontractor. As a result, sub-subcontractors or vendors of the subcontractor are not paid and they attempt to collect payment from the owner or general contractor. However, the Illinois courts usually deny the sub-subcontractor payment claims because the sub-subcontractor contracted with the sub-contractor for services or material and not the owner or general contractor. The courts deny such claims under various legal theories, frequently because there was no privity of contract between the owner or general contractor and sub-subcontractor.

In C. Szabo Contracting, the general contractor had contracted with the subcontractor to install storm sewers and perform other work for a highway project. Subsequently, the contract was amended to require the subcontractor to install sewers using pipe-jacking or tunneling. The subcontractor then hired the sub-subcontractor to do the pipe-jacking.

The work was performed, including the pipe-jacking. However, the general contractor never paid the subcontractor or sub-subcontractor for their work. Accordingly, the sub-subcontractor sued the general contractor for payment. The trial court entered judgment for the sub-subcontractor and the general contractor appealed.

On appeal, the appellate court rejected the trial court’s reasons for ordering the general contractor to pay the sub-subcontractor. The appellate court, however, analyzed whether it could affirm the finding for the sub-subcontractor relying on the legal theory of “unjust enrichment.”

At the outset, the appellate court noted that no Illinois case had held that a sub-subcontractor could seek payment from a general contractor for work performed under a subcontract where the general contractor “requested and received a benefit, but has paid no one for it.” Mere knowledge that the work was being performed was insufficient. The general contractor must specifically request performance in order for court to find the general contractor liable to the sub-subcontractor for payment. Further, the court ruled that the general contractor could not be held liable if it had already paid the subcontractor for the sub-subcontractor’s work.

The appellate court then looked at the facts. It concluded that the general contractor had requested the specific work and that it had been performed. Further, the court that the charge was the price agreed to by the general contractor. Finally, the appellate court noted the general contractor had not been paid the subcontractor, so there was no risk of double payment for the payment for the same work. Thus, the court found in favor of the sub-subcontractor and affirmed the judgment of the trial court.

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