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Violations of the home repair and remodeling act do not render a contract void and unenforceable.


Universal Structures, Ltd v Buchman, No. 1-09-1421, 2010 WL 2675216 (1st D 2010)

On June 30, 2010, the Appellate Court of Illinois, First District, reversed a decision of the Circuit Court of Cook County, finding that a contractor's procedural violations of the Home Repair and Remodeling Act ("the Act") (815 ILCS 513/1 et seq) did not preclude the contractor from asserting a mechanic's lien or breach of contract claim. (For an update on the Act, see the article beginning on page 462.)

In the fall of 2006, plaintiff, a general contractor, and defendants, a married couple, entered into an oral agreement to remodel defendants' home. Pursuant to the agreement, plaintiff would tender itemized work orders to defendants prior to performing any remodeling work. If a work order was accepted, defendants would pay a portion of the amount owed and work would commence. The remaining balance of the work orders was paid in several installments during the course of work. The total cost of the remodeling services was $1,339,042. Defendants paid plaintiff the sum of $1,234,544 leaving an outstanding balance of $104,498, which formed the basis of plaintiff's mechanic's lien.

On July 1, 2008, plaintiff filed a verified complaint for foreclosure of its mechanic's lien and alleged a breach of contract. On September 16, 2008, defendants filed a motion to dismiss. Defendants alleged that plaintiff's failure to (1) present a written contract or work order for them to sign and (2) provide them with a consumer rights brochure were violations of the Act, which precluded plaintiff from recovery. Following a hearing on April 22, 2009, the circuit court granted the defendants' motion to dismiss based upon plaintiff's failure to comply with the Act. Plaintiff timely appealed.

Pursuant to section 20 of the Act, for any contract over $1,000 a contractor must provide a consumer rights brochure. Pursuant to section 30 of the Act, for any work over $1,000 a contractor must obtain a signed contract or work order. As the appellate court noted, it is undisputed that plaintiff failed to comply with the Act. That aside, the real question in this case turns upon whether the failure to strictly comply with the Act renders an otherwise valid oral agreement void or otherwise unenforceable. To answer this question the appellate court turned to two rather recent court decisions.

First, in Artisan Design Build, Inc v Bilstrom, 397 Ill App 3d 317, 922 NE2d 361 (2d D 2010), a case similar to the one presented, the second district held that a contractor does not forfeit its legal and equitable cause of action when it fails to provide homeowners with a consumer rights brochure. Section 20 of the Act does not provide that failure to furnish a brochure constitutes an unlawful act or negates the enforceability of the contract. Second, in Fandel v Allen, 398 Ill App 3d 177, 2010 WL 184076 (3d D 2010), the third district held that the Act is void of any language which serves to invalidate a party's agreement when the contractor fails to obtain signed work orders or deliver a consumer rights brochure. If a homeowner has suffered any damages as a result of the contractor's unlawful violations, section 10(a) of the Act permits the homeowner to pursue a cause of action under the Consumer Fraud and Deceptive Businesses Act.

Citing Artisan and Fandel, the appellate court in this case held that nowhere in the Act does it state that a contract that does not strictly comply with the statute is null and void. The fact that a contract may violate the Act does not render the contract unenforceable. Rather, "contracts are unenforceable when the subject matter of the contract or the purpose of the contract violated the law." Universal at *8. In this case, the parties entered into an oral agreement, plaintiff tendered itemized work orders prior to performing the work, and defendants, after paying a portion of the cost, advised plaintiff to proceed in accordance with the work orders. Nothing in the underlying bargain is in derogation of the law. Thus, the oral agreement between the parties was valid, and any procedural violation of the Act does not bar the plaintiff from asserting a mechanic's lien of breach of contract claim.

Prepared by students of the University of Illinois College of Law
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Publication:Illinois Bar Journal
Date:Sep 1, 2010
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