In the thirty-fifth issue of Querrey & Harrow's Construction Law Quarterly Newsletter released in January 2007, the case of MD Electrical Contractors, Inc. v. Abrams, 2006 Ill. App. LEXIS 1096 (Nov. 27, 2006), was reviewed under the title THE NEW SHIELD: THE HOME REPAIR AND REMODELING ACT AS A DEFENSE. In the MD Electrical case, MD Electrical was a subcontractor who sued the homeowners for the value of improvements made by MD Electrical on the homeowners' home. The homeowners refused to pay and argued that the Home Repair and Remodeling Act (the Act), 815 ILCS 513/1 et seq., barred MD Electrical from seeking any amounts because it violated the Act when it worked on the project without a written contract and without providing a consumer rights brochure as required by the Act.
The court in MD Electrical concluded that the Act only applied to general contractors and, therefore, MD Electrical, as a subcontractor did not have to comply with the provisions of the Act. The court ruled that the purpose of the Act was to improve communications between consumers and persons engaged in the business of home repair and remodeling to increase consumer confidence and reduce the likelihood of disputes and also to promote fair and honest business practices. The court also found that the legislature intended the written contract requirement of the Act to provide law enforcement with an opportunity to find fraudulent home improvement contractors before they had an opportunity to commit additional acts of fraud.
Since the release of the MD Electrical case, the Illinois Appellate Court has once again reviewed the implications of the Act with regards to attempts by contractors to recover for remodeling work done on residential property for which the owner has not paid. The Fourth District Appellate Court of Illinois in the case of Smith v. Bogard, Docket Number 4- 07-0240 (released for publication December 27, 2007), addressed a case in which Smith performed construction work for the Bogards as part of a remodeling project on their home.
In this case, Smith met with the Bogards regarding adding a living room to the Bogards' home and gave an oral estimate of $20,000 for the project. Smith began work on the project in October 2003 and completed the project in February 2004 at a total cost of $25,515.85. The Bogards previously paid Smith $15,000, leaving an unpaid balance of $10,515.85. The Bogards refused to pay the remainder of the balance and Smith sued for breach of contract, unjust enrichment, and quantum meruit. It is typical for a breach of contract cause of action to include counts for quantum meruit and unjust enrichment so that a contractor can recover the value of the work performed if the contract claim fails. The question regarding equitable remedies such as unjust enrichment and quantum meruit were left unaddressed in the MD Electrical Contractor's case.
The Bogards filed a Motion to Dismiss claiming that the Act required Smith to have a written contract before initiating construction under Section 15 of the Act and he was also required to provide the Bogards with a Consumer's Rights brochure under Section 20 of the Act. The trial court dismissed Smith's claim completely because it found that without a written contract and without providing the Bogards with the required brochure, Smith performed the work in violation of the Act.
The court also denied the equitable relief because it reasoned that providing such relief would defeat the entire purpose of the Act and the public policy behind it. The Appellate Court agreed with the trial court holding that despite the business relationship between the Bogards and Smith, the fact that the Bogards paid for a portion of the work, and the fact that the Bogards were getting the value of the addition to their house without having to pay for it, the Act applied and, therefore, the contract was null and void and recovering under the equitable counts was against the purpose of the Act.
This is the third case that has addressed the implications of the Home Repair and Remodeling Act on construction projects in Illinois. However, this is the first case to address whether equitable remedies such as quantum meruit and unjust enrichment are affected by the Act.
Based on these cases, it appears that the courts will strictly construe the provisions of the Act and require written contracts for any remodeling job over $1,000 and also require contractors to provide a Consumer's Rights brochure to each homeowner before the job is commenced or risk losing the value of any work done on the project. It is unknown what further implications the Act will have on longstanding principles of contract and other equitable measures between owners and contractors and the obligations of contractors to fully inform owners before they perform work.
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