No Valid Contract in New York

George Azarias wanted some electrical work done before moving into his Manhattan apartment. Work included upgrades to electrical wiring, a sound system and Internet connection. Azarias solicited a proposal from Orpheous Nelson of Orpheous Electrical, Inc. According to Azarias, the proposal from Nelson was a little vague. It didn’t specify either the work to be done or the total price. Still, Nelson got an OK to start work. Unfortunately, the job didn’t go as planned.

Nelson’s work was slow and “lousy” according to Azarias. After paying over $20,000, Azarias fired Nelson and hired another electrical contractor. Then Azarias filed suit against Nelson, asking damages of $30,000 for breach of contract.

Counsel for Nelson defended, insisting there was no valid contract. Hence there could be no breach of contract. Neither Azarias nor Nelson signed anything. Nelson sent his proposal by email. It was never signed. New York General Business Law § 771 makes it clear. Home improvement contracts must be in writing and must be signed by both the contractor and the owner.

Section 771 is cited most often by owners as defense against a contractor’s claim for payment. A New York contractor who ignores § 771 isn’t going to collect the full contract price. Instead, the law implies an obligation to pay only some reasonable amount to prevent unjust enrichment. That’s called quasi-contract. The contractor can claim quantum meruit – the reasonable value of services, usually excluding any profit.

But can an owner claim contract damages if there is no valid written agreement? Put another way, can a contractor use § 771 as defense against a contract claim by the owner?

A July 1, 2025 decision by the Supreme Court of the State of New York, New York County, answers that question:

Of course, this statute [§ 771] typically arises in situations . . .where a contractor is suing the homeowner for failure to pay. But the Court sees no reason to depart from this caselaw and find that there is no valid breach of contract claim as there was no contract signed by the parties as required under the General Business Law. Plaintiff [Azarias] can pursue his claim under a quasi-contract claim . . . barring a contractor from recovering under a breach of contract theory for failure to obtain a signed written agreement but permitting the contractor to pursue a quantum meruit claim

Notice that § 771 is heads I win and tails you lose for New York property owners. With a lame contract, New York contractors are at a disadvantage, whether plaintiff or defendant. I agree with the court’s decision. Here’s why. Section 771 is consumer protection law. It’s purpose is to protect owners from abuse by sophisticated vendors. Allowing contractors to use the law against owners would be contrary to what lawmakers in Albany intended.

If you do home improvement work in New York, the case of Azarias v. Nelson is just one more reason to work under good contracts. There is no better contract-writing tool than Construction Contract Writer. The trial version is free.