A Busted NY Home Improvement Contract

Last month I explored what Pennsylvania courts allow contractors who use a bum contract. The rules in New York are different – and the difference is major. I’ll explain. 

Like Pennsylvania (and 30 other states), New York requires a written contract for residential construction work. Like Pennsylvania, New York contracts have to include a long list of notices and disclosures. But unlike Pennsylvania, New York courts are split on what happens when a contractor uses a defective agreement. Pennsylvania allows the contractor to sue for quantum meruit, Latin for "as much as deserved". That’s a clumsy tool, as explained last month. But at least the contractor collects something. New York may or may not allow as much. The New York case of Chapman v. Davis (decided March 22, 2022) illustrates the point.

Cheryl Davis wanted to convert the basement of her Pleasant Valley, NY, home into bedrooms for her two daughters. Chapman Construction offered to do the work and wrote up the agreement. 

When it came time to make the final payment, Chapman Construction got hung out to dry. Cheryl claimed egress windows in the basement didn’t comply with the code and had to be re-done. Cheryl refused to pay. Chapman sued.

As I’ve explained before, when the job goes bad, you better have a good contract. Chapman didn’t:

• The contract was signed by a friend, not Cheryl, the homeowner.
• Chapman Construction forgot to put their address on the contract.
• The estimated starting and ending date was nowhere to be found.
• A state notice warning about mechanics liens was omitted.
• The state notice on deposit of progress payments was absent.
• The required notice of 3-day right to cancel didn’t appear anywhere.

In short, Chapman Construction’s contract didn’t even come close to meeting requirements in New York General Business Law § 771. 

Now What?

What does a New York contractor recover on a bad home improvement contract? New York courts are split on the issue.

Appellate divisions in the Third and Fourth Judicial Departments rule that failure to comply with GBL § 771 renders the home improvement contract unenforceable and bars recovery for breach of contract.

In the Second Judicial Department, some courts have ruled that failure to comply with GBL § 771 does not make the contract unenforceable. Other courts in the same Judicial Department have come to the opposite conclusion: Failure to comply with GBL § 771 leaves the contract void and unenforceable.

Eventually, the New York State Court of Appeals will wade in with a decision that’s binding on all New York courts. Absent that decision, Judge Fairlie elected to treat the Davis contract as void and unenforceable. Chapman Construction got nothing for breach of contract.

But What About Quantum Meruit?

Couldn’t Chapman Construction at least recover part of what they were owed, "as much as deserved”? That’s what Pennsylvania courts allow.

Sorry. That doesn’t work in New York Justice Courts. Quantum meruit is an equitable remedy, New York Justice Courts lack equity jurisdiction. The result: Chapman’s claim was denied and dismissed.

Don’t make the same mistake. Construction Contract Writer drafts legally enforceable contracts and subcontracts for any state and for any type of project. The trial version is free.