Contractor Allowed To Sue Under Quasi-Contract Theory
Written by: Alan Nochumson
Even if you do not deal with contractors in your practice, depending upon how handy and busy you are, many of us who own homes engage contractors to perform projects around the house ranging from menial tasks to complete home renovations.
Not all contractors are created equal, and that is why, several years ago, Pennsylvania enacted the Home Improvement Consumer Protection Act (HICPA), 73 Pa. Stat. Ann. § 517.1, et seq.
This statute requires individuals who and companies that perform home contracting services to not only register with the state as a “contractor,” but also mandates the type of terms and conditions that must be contained within any valid and enforceable home improvement contract.
In Shafer Electric and Construction v. Mantia, 2013 PA Super 111 (May 10, 2013), the Superior Court of Pennsylvania decided whether a contractor could recover payment from homeowners for work performed by the contractor under a quasi-contract theory if the home improvement contract is deemed invalid and unenforceable under the HICPA.
In Mantia, the contractor, Shafer Electric and Construction, and the homeowners, Raymond and Donna Mantia, entered into an agreement for the contractor to erect an addition to the homeowners’ garage, the opinion said. The contractor completed almost $38,000 of the home improvement work. A dispute soon ensued between the parties and the homeowners refused to pay the contractor for the work performed, the opinion said.
Shafer then filed a mechanic’s lien against the property and, thereafter, filed a complaint against the Mantias. In the complaint, Shafer pled for relief under theories of breach of contract as well as quantum meruit.
After being served with the complaint, the Mantiasfiled preliminary objections to the complaint, arguing that the mechanic’s lien should be stricken because the agreement entered into by the parties was invalid and unenforceable under the HICPA. In making their argument, the Mantias indicated that, while Shaferwas licensed as a contractor in its principal place of business in West Virginia, it was not registered to do so in Pennsylvania under the HICPA.
Furthermore, in their preliminary objections, the Mantias argued that the agreement entered into by the parties did not conform to Section 517.7 of the HICPA.
Subsection (a) of Section 517.7 sets forth that, in order for a home improvement contract to be considered valid and enforceable against a homeowner in Pennsylvania, the home improvement contract must: be in writing, containing the home improvement contractor’s Pennsylvania-issued registration number; be signed by all parties; contain the entire agreement between the homeowner and the contractor; contain the date of the transaction; contain the name, address and telephone number of the contractor; contain the approximate starting date and completion date of the home improvement project; include a description of the work to be performed, the materials to be used and a set of specifications that cannot be changed without a written change order signed by the homeowner and the contractor; include the total sales price under the contract; include the amount of any down payment plus any amount advanced for the purchase of special order materials; include the names, addresses and telephone numbers of all subcontractors on the project known at the date of signing of the contract; indicate that the contractor maintains liability insurance in an amount not less than $50,000; and include a notice of the right of the homeowner to rescind the contract.
Subsection (g) of Section 517.7 also allows a contractor to recover under the theory of quantum meruit if that contractor has complied with Subsection (a) of Section 517.7. As such, a court may award “payment for work performed based upon the reasonable value of services which were requested by the [home]owner” if “it would be inequitable to deny such a recovery.”
The trial court in Mantia sustained the preliminary objections to the complaint and struck the mechanic’s lien, concluding that the agreement entered into by the parties was, indeed, invalid and unenforceable under Section 517.7(a) of the HICPA, the opinion said. It is unclear from the opinion why the trial court determined the agreement in Mantia was invalid and unenforceable.
In one portion of the opinion, it is implied that a written agreement exists between the parties, and, in another portion of the opinion, it is stated that no such written agreement is in existence.
The trial court may have concluded that Shafer did not comply with Section 517.7(a) merely because it was not registered as a contractor in Pennsylvania and, thus, any written agreement between the parties was invalid and unenforceable for that reason alone.
Why the contract was deemed invalid and unenforceable under the HICPA is not of great importance as the trial court barred Shafer from seeking recovery based upon a theory of quantum meruit as well. Since the agreement entered into by the parties did not meet the statutory requirements of Section 517.7(a), the trial court held that Shafer was not permitted under Section 517.7(g) to recover payment from the homeowners.
Shafer appealed the trial court’s ruling to the Superior Court.
On appeal, the Superior Court focused its attention on whether Shafer was barred from seeking recovery from the Mantias based upon a theory of quantum meruit because the contract did not comply with the HICPA.
The Superior Court ultimately found error with the trial court’s ruling, holding that the HICPA was silent as to actions in quasi-contract, such as unjust enrichment and quantum meruit, which, by definition, implicated the fact that, for whatever reason, no written contract existed between the parties.
The Superior Court noted that “a plain reading of the HICPA as written serves only to impermissibly limit its true purpose in a manner that makes quantum meruit recovery under Subsection (g) impossible, and subverts what we believe to be the [legislature]’s obvious intention in providing for a quasi-contract theory of recovery in situations where no valid written contract exists.”
According to the Superior Court, it was obvious that the purpose of the inclusion of Section 517.7(g) “was to provide for an equitable remedy in situations where there was no valid and enforceable written contract under Section 517.7(a)” and “to conclude otherwise renders the type of recovery contemplated by legislature in Subsection (g) impossible.”
The Superior Court emphasized that the HICPA was not drafted to yield “an absurd result of providing contractors with an equitable means of recovery under quasi-contract theory, but only when a written contract exists such that quantum meruit recovery is not needed nor allowed by law.”
In doing so, the Superior Court approvingly cited to a section of Shafer’s brief filed on appeal in Mantia where Shafer noted that “if this were the intent of the drafters of the HICPA, to require the contractor to comport with all of the requirements of Section 517.7(a) to recover in quantum meruit, then the contractor does not need to recover on a quantum meruit theory, for the value of his services, because he would have a valid and enforceable contract on which to rely.”
This is not the first time the Superior Court has allowed a contractor to seek recovery of payment for home improvement work performed under a theory of quantum meruit when the parties did not enter into a valid and enforceable contract under the HICPA.
Last year, in Durst v. Milroy General Contracting, 52 A.3d 357 (Pa. Super. Ct. 2012), the Superior Court faced a situation where a contractor brought a quantum meruit claim against homeowners after they failed to pay the contractor pursuant to an oral contract for improvements made to their home.
In Durst, a panel of the Superior Court addressed whether the plain language of the HICPA precludes lawsuits where home improvement work was conducted, but no valid contract exists and the contractor is seeking to recover under a theory of quantum meruit.
Based upon the same reasoning employed by the Superior Court in Mantia, the panel of the Superior Court in Durst held that quasi-contract theories of recovery survive the HICPA.
While the contractor in Mantia was allowed to pursue payment against the homeowners for the home improvements so made, the contractor’s failure to comply with the HICPA should not be taken lightly. At trial, Shafer will be required to establish the “reasonable” value for the home improvement work. If Shafer had simply complied with the HICPA, the value of the home improvement work would not have been at issue and, instead, the trial court would have taken the agreed amount charged under contract, less the value of the incomplete work established by the homeowners, at face value.
This is why it is so important for contractors in Pennsylvania to ensure they, along with their home improvement contracts, are in compliance with the HICPA before commencing any work for homeowners.
Reprinted with permission from the July 16, 2013 edition of The Legal Intelligencer © 2013 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, firstname.lastname@example.org or visit www.almreprints.com.