Archive for October 2010

Illinois Supreme Court Permits Contractors to Recover on Oral Contracts over $1000

October 11, 2010

On September 23, 2010, in the case of K. Miller Construction Co. v. McGinnis, No. 109156, 2010 Ill. LEXIS 1070 (Ill. Sept. 23, 2010), the Illinois Supreme Court reversed in part and affirmed in part an appellate court’s ruling regarding dismissal of a contractor’s claim for recovery concerning home remodeling work completed pursuant to an oral contract.  The supreme court reversed on the issue that a contractor could not enforce an oral contract and affirmed the judgment that a contractor could recover in quantum meruit for the reasonable value of the contractor’s work.

In K. Miller Construction, the contractor entered into an oral contract with the homeowners to undertake a home remodeling project as a general contractor for the sum of $187,000.  Shortly thereafter, the homeowners wanted to increase the work to be performed with significant modifications, raising the contract sum to approximately $500,000.  After that, the homeowners paid one invoice in full but refused to make any other payments to the contractor until all construction work on the project was complete.  Upon completion of the project, however, the homeowners made some additional payments to the contractor but refused to pay the remaining balance of $300,000.

When the contractor filed suit against the homeowners, the homeowners moved to dismiss citing the Home Repair and Remodeling Act of 2006, which requires that persons engaged in home remodeling must provide a written contract for any project exceeding $1000 and that failure to do so is unlawful.  The trial court granted this motion, dismissing the contractor’s cause of action with prejudice.  The appellate court affirmed in part and reversed in part, holding that the contractor’s breach of contract claim and foreclosure of mechanics lien could not go forward, though it allowed the contractor to proceed with its quantum meruit claim.  Subsequent to the appellate court’s ruling, however, new legislation was enacted which essentially re-wrote the “unlawful” section of the act, indicating that the remedy for violations of the Act was to be had under the Consumer Fraud and Deceptive Business Practices Act.  This legislation clarified in effect that the General Assembly did not intend for violations of the writing requirement under the Act to render oral contracts unenforceable.  Therefore, in light of this new legislation, the Illinois Supreme Court held that there is no public policy requiring that oral contracts for home remodeling over $1000 be held unenforceable or that quantum meruit be denied.

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