Table of Contents
General Construction Law Questions
What is the required compliance with Illinois Contracts for the Construction of Buildings? Substantial or Strict Compliance?
Illinois Courts have held that: “persons contracting for the construction and erection of monuments to perpetuate the memory and mark the resting place of their dead are entitled to insist upon a strict compliance with the specifications as to design and character of workmanship.” Oakes v. Barbre, 127 Ill. App. 208, 210 (Ill. App. Ct. 1906)
However, contracts for the construction of a building typically only require substantial compliance. See generally Oakes v. Barbre, 127 Ill. App. 208, 210 (Ill. App. Ct. 1906); Fitzgerald v. Neville, 210 Ill. App. 659, 659 (Ill. App. Ct. 1918).
Can a General Contractor bind a Subcontractor to perform the Work at the Bid Price?
Yes if the general contractor relies on the subcontractor’s bid, then the general contractor can estop the subcontractor from backing out of such bid on the basis of promissory estoppel. Illinois Valley Asphalt, Inc. v. J.F. Edward Construction Co., 413 N.E.2d 209 (3d Dist. 1980).
“The elements of promissory estoppel [in Illinois] are: (1) a promise unambiguous in terms; (2) reliance on such promise by the party to whom it is made; (3) this reliance is expected and foreseeable by the party making the promise; and (4) the one to whom the promise is made must rely on the promise to his injury.” Illinois Valley Asphalt, Inc. v. J. F. Edwards Const. Co., 90 Ill. App. 3d 768, 770, 413 N.E.2d 209, 211 (1980).
Another way of defining the elements of promissory estoppel is the following: “a plaintiff must show (1) that the defendant made a promise unambiguous in its terms, (2) that the plaintiff relied on the promise, (3) that this reliance was expected and foreseeable from the defendant’s position, and (4) that the plaintiff’s reliance on the promise was detrimental.” Pickus Const. & Equip. v. Am. Overhead Door, 326 Ill. App. 3d 518, 523, 761 N.E.2d 356, 361 (2001).
What does a Contractor have to Prove to be entitled to Additional Compensation on a Construction Project?
“[A] contractor must prove the following elements by clear and convincing evidence to recover additional compensation for extra work on a construction contract: (1) the work was outside the scope of the construction contract; (2) the extra items were ordered by the owner; (3) the owner agreed to pay extra, either by his words or conduct; (4) the extras were not furnished by the contractor as his voluntary act; and (5) the extra items were not rendered necessary by any fault of the contractor.” 209 N. Walnut, L.L.C. v. Origin Fire Prot., Inc., 2013 IL App (2d) 120831-U, ¶ 29(citing A.W. Wendell & Sons, Inc. v. Qazi, 254 Ill.App.3d 97, 104 (1993)).
“The contractor sustains this burden by proving that the extra work was requested by the owner, and there is no evidence indicating that the work was necessary or voluntarily performed due to fault by the contractor.” 209 N. Walnut, L.L.C. v. Origin Fire Prot., Inc., 2013 IL App (2d) 120831-U, ¶ 29(citing A.W. Wendell & Sons, Inc. v. Qazi, 254 Ill.App.3d 97, 104 (1993)).
What is a Pay-If-Paid Clause in Illinois Construction Law?
“[A] pay-if-paid clause, as the name suggests, provides that a subcontractor will be paid only if the contractor is paid and thus ensures that each contracting party bears the risk of loss only for its own work. A typical clause of this type might say: ‘Contractor’s receipt of payment from the owner is a condition precedent to contractor’s obligation to make payment to the subcontractor; the subcontractor expressly assumes the risk of the owner’s nonpayment and the subcontract price includes the risk.’” Beal Bank Nevada v. Northshore Ctr. THC, LLC, 2016 IL App (1st) 151697, ¶ 24, 64 N.E.3d 201, 209, appeal denied sub nom. Beal Bank Nevada v. FCL Inv’rs, Inc., No. 121523, 2017 WL 598624 (Ill. Jan. 25, 2017).
What is a Pay-When-Paid Clause in Illinois Construction Law?
“A pay-when-paid clause governs the timing of a contractor’s payment obligation to the subcontractor, usually by indicating that the subcontractor will be paid within some fixed time period after the contractor itself is paid by the property owner.” Beal Bank Nevada v. Northshore Ctr. THC, LLC, 2016 IL App (1st) 151697, ¶ 24, 64 N.E.3d 201, 209, appeal denied sub nom. Beal Bank Nevada v. FCL Inv’rs, Inc., No. 121523, 2017 WL 598624 (Ill. Jan. 25, 2017).
“A typical clause of this type might say: ‘Contractor shall pay subcontractor within seven days of contractor’s receipt of payment from the owner.’” Id. (citing Robert F. Carney & Adam Cizek, Payment Provisions in Construction Contracts and Construction Trust Fund Statutes, 24 CONSTRUCTION LAW, Fall 2004, at 5, 5.).
“These clauses address the timing of payment, not the obligation to pay. They do not excuse a contractor’s ultimate liability if it does not receive payment by the property owner, so they do not transfer the risk of ‘upstream’ insolvency from contractor to subcontractor and on down the chain.” Beal Bank Nevada v. Northshore Ctr. THC, LLC, 2016 IL App (1st) 151697, ¶ 24, 64 N.E.3d 201, 209, appeal denied sub nom. Beal Bank Nevada v. FCL Inv’rs, Inc., No. 121523, 2017 WL 598624 (Ill. Jan. 25, 2017).
Illinois Prompt Payment Act
What is the Illinois Prompt Payment Act?
The Illinois Contractor Prompt Payment Act states that if a contractor performs work in accordance with that required of him/it under the contract, and payment for the same is undisputed, the owner must pay said contractor within 15 days.
Contractors are required to pay subcontractors within 15 days as well. The date the 15 days begins to run is the date that a pay application is completed, submitted, and accepted. The Prompt Payment Act also allows the claimant to collect 10% interest.
If proper notice is provided (7 days written), the unpaid contractor may cease performance of work until payment is made by the obligated party.
When did the Prompt Payment Act become part of Illinois law?
In 2007, the Illinois Contractor Prompt Payment Act, which was denominated House Bill 743, passed both houses and was sent to Rod Blagojevich, the governor at the time, for signature. The Contractor Prompt Payment Act is officially set forth under 815 ILCS 603/1 et seq.
Home Repair and Remodeling Act
What is the Home Repair and Remodeling Act?
The Home Repair and Remodeling Act is governed by (815 ILCS 513/1 through 999 (West 2006)). “The Act requires that for any repair or remodeling work over $1,000, ‘a person engaged in the business of home repair or remodeling shall furnish to the customer for signature a written contract or work order.’” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1085, 920 N.E.2d 665, 670 (2009) (citing 815 ILCS 513/15 (West 2006)).
What are some of the Requirements for Individuals or Contractors governed by the Home Repair and Remodeling Act?
The policy behind the Home Repair and Remodeling Act is to protect customers from unfair or deceptive practices. Thus, the Act demands that individuals or contractors performing repair or remodeling work in Illinois follow certain statutory requirements.
One of these requirements deals with the contract. The contract that is furnished to the customer must include certain disclosure requirements, such as the cost and contact information for the company performing the work as well as its address. See Behl v. Gingerich, 396 Ill. App. 3d 1078, 1085, 920 N.E.2d 665, 670 (2009); (815 ILCS 513/15 (West 2006)).
Construction companies or individuals performing work that is governed by the Act are also required to “provide to [] customers a copy of the ‘Home Repair: Know Your Consumer Rights’ pamphlet prior to the execution of any home repair and remodeling contract.” See Behl v. Gingerich, 396 Ill. App. 3d 1078, 1085, 920 N.E.2d 665, 670 (2009); (815 ILCS 513/20 (West 2006)).
In addition to providing a copy of the pamphlet, the Act makes it “unlawful for any person engaged in the business of home repairs and remodeling to remodel or make repairs before obtaining a signed contract or work order [when the amount of the work is] over $1,000.” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1085, 920 N.E.2d 665, 670 (2009)(citing 815 ILCS 513/30 (West 2006)).
What is the Purpose of the Home Repair and Remodeling Act?
The purpose of the Home Repair and Remodeling Act is “to improve communication between consumers and persons engaged in the business of home repairs or remodeling in order to ‘increase consumer confidence, reduce the likelihood of disputes, and promote fair and honest practices in [the repair and remodeling] business in this State.’” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1085, 920 N.E.2d 665, 672 (2009) (Quoting 815 ILCS 513/5 (West 2006)).
What happens if the Individual or Contractor fails to Substantially Comply with the Home Repair and Remodeling Act?
The contractor or individual could potentially forfeit their right to collect on the Project. For example, in Smith v. Bogard, the Illinois Court of Appeals, of the Fourth District, “held that the contractor’s failure to provide a written contract or work order and the consumer-rights brochure prior to beginning construction defeated his legal and equitable claims for recovery.” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1088, 920 N.E.2d 665, 673 (2009).
In other situations, however, the Illinois Court of Appeals has found that failure to substantially comply does not bar recovery.
The Illinois Court of Appeals for the First District did not follow the Smith decision and instead permitted the contractor to recover under a quantum meruit theory.
While the court held that the agreement was not enforceable because of the writing requirement, “the court [also] concluded that the writing requirement of the Act did not foreclose an equitable theory of recovery between, in that particular case, an honest contractor and a ‘sophisticated’ consumer.” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1089, 920 N.E.2d 665, 673 (2009)(citing K. Miller Construction, 394 Ill.App.3d at 250, 332 Ill.Dec. 857, 913 N.E.2d at 1149–50).
“[T]he Second District considered whether a contractor’s failure to provide the homeowners with the consumer-rights brochure in violation of section 20 of the Act (815 ILCS 513/20 (West 2006)) forfeited his legal and equitable causes of action.” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1089, 920 N.E.2d 665, 673 (2009).
“The court concluded that a contractor’s failure to provide the brochure may provide a homeowner with a cause of action under the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 through 12 (West 2006)) but does not ‘vitiate the contractor’s right to recover either in equity or in law.’” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1089, 920 N.E.2d 665, 674 (2009)(quoting Artisan Design, 397 Ill.App.3d at 328, 337 Ill.Dec. at 247, 922 N.E.2d at 370).
Quantum Meruit
What is Quantum Meruit in the Illinois Construction Law Context?
Quantum meruit is a quasi-contract claim based on principles of equity (fairness). When work is performed and Illinois courts deem that there was not a valid, legally binding contract, then out of principles of fairness, the courts will consider whether the person or entity performing the work should be entitled to payment.
The courts describe the conferring of a benefit on another, and whether an award is warranted: “‘[O]nly if the circumstances of its receipt or retention are such that, as between the two persons, it is unjust for him to retain it. The mere fact that a person benefits another is not of itself sufficient to require the other to make restitution therefor.’” Housewright v. Vinyard, 2013 IL App (3d) 120666-U, ¶ 37 (quoting Rutledge v. Housing Authority of the City of East St. Louis, 88 Ill.App.3d 1064, 1069 (1980) (quoting Restatement of Restitution § 1, Comment c (1937))).
How can Quantum Meruit be established on an Illinois Construction Project?
A party can establish a claim for quantum meruit through evidence of actual expenditures on labor, including time sheets and testimony, as to actual labor used and amounts paid for materials. BRL Carpenters, Ltd. v. American National Bank & Trust Co., 126 Ill.App.3d 137 (1984). However, “[p]roof of a bill for a particular amount, without more, is not evidence of the value of services rendered or materials furnished.” Keno & Sons Construction Co. v. La Salle National Bank, 214 Ill.App.3d 310, 312 (1991). Absent a detailed breakdown of costs, there is no way to determine the extent of recovery to which the claimant is entitled. Id. Housewright v. Vinyard, 2013 IL App (3d) 120666-U, ¶ 37.