Five Hundred Pages Later

As pointed out last month, 31 states require a written contract for residential construction. The question I didn’t answer last month: What can the contractor collect if there is no valid contract?

Last month, a Pennsylvania court framed a very precise answer to that question. First, the facts:

So Young Jang wanted to renovate the kitchen of her home in Berwyn, PA. She selected Artisan Builders Inc. (ABI) of East Norton, PA to do the work. ABI got a signed contract. That was February of 2016. When the kitchen was done, Jang had more work for ABI: new flooring, renewing the master bathroom, baseboards, lighting, crawlspace insulation, replacing joists, multiple doors and frames. In all, ABI wrote five contracts and got eighteen signed change orders.

That was all before June 2016. After working together for over five months, Jang fired ABI and refused to pay any more. ABI was stuck. They filed a lien claim for work completed and not paid. At the close of trial on the lien claim, Judge Tunnell granted Jang’s motion for a non-suit. The 23 contracts and change orders omitted notices and disclosures required by Pennsylvania’s Home Improvement and Consumer Protection Act ("HICPA"). The contracts were invalid under PA law.

Now what? ABI claimed they were still due $35,371. Judge Tunnell gave ABI leave to file an amended complaint for quantum meruit. That’s the reasonable value of services requested by Jang.

Six months later, trial resumed. This time ABI had their paperwork ready, over five hundred pages of receipts, time sheets, and invoices -- including costs and expenses, estimates and invoices all kept by QuickBooks. ABI claimed damages of $43,525 as quantum meruit (the value of services requested). Counsel for ABI added an unjust enrichment claim (value Jang received). Work done by ABI had increased the value of Jang’s home by over $100,000.

Once again, the trial court ruled in favor of Jang. “[ABI] cannot merely submit its own loss, i.e., the value of labor and materials expended, as the measure of recovery, but must instead demonstrate that the defendant has in fact been benefitted . . .” So ABI got nothing.

ABI wanted another try, this time at the appellate court. Last month the Pennsylvania Superior Court reversed the trial court. A busted contract leaves the contractor with:

1. No lien rights.
2. No right to recover for benefits received (unjust enrichment).
3. But with a suit for the reasonable value of services (quantum meruit).

Fine. ABI was going to get something. But the court wasn’t willing to accept ABI’s invoices as the reasonable value of services. “Therefore, we remand to the trial court to determine the reasonable value of the services based on the evidence presented at the January and June 2020 proceedings, and to convene an additional hearing if it deems it necessary to do so.” And that’s where the case of ABI vs. Jang stands now, six years after work started. ABI has to show that every expense on the job, both labor and materials, was “reasonable”.

Don’t go down that road. Working under a void contract is foolish, like building what can’t possibly pass inspection. Construction Contract Writer drafts perfectly legal contracts for every type of work and for any state. The trial version is free.