One of the Hollywood moguls of the ’30’s coined the wonderful phrase: “An oral contract isn’t worth the paper it’s written on.” And that’s advice to be heeded. A well-drafted agreement (on paper, of course!) can cause parties to avoid litigation in transactions that fail for one reason or another; if the person drafting the agreement anticipates problems in advance, the parties are much less likely to sue if the deal fails.
One of the reasons lawyers are not exactly beloved and are deemed to be prophets of doom-and-gloom is that a lawyer doing his/her job well tries to anticipate all the things that can go wrong in a negotiation. Virtually every party to a brand new agreement, whatever the subject matter, approaches full of optimism and enthusiasm; so it’s like running into a concrete wall and deflating to hear the attorney who’s been hired to reduce the agreement to writing outline all the potential catastrophes in the project.
One of the equitable doctrines that has evolved in common law over the centuries is that even though an agreement may not be in writing, if one party’s property is enhanced in value as the result of the efforts of a contractor, the contractor should be fairly compensated for its efforts under a claim of quantum meruit. Otherwise, the party who is ordered to pay has been deemed “unjustly enriched.”
In a recent case, Shafer Electric & Construction v. Mantia, a contractor was hired to add a 34′ by 24′ garage to a home for an agreed upon $102,000. However, though the agreement the parties signed was extremely detailed, it was upon a form the contractor had apparently taken from the internet; and it failed to meet the technical requirements of the Pennsylvania Home Improvement Consumer Protection Act (“HICPA”). The job went badly, several changes were made to the original plans; however, the home owners refused to sign a new agreement, incorporating the changes. Negotiations failed, and the owners refused to pay the contractor for any of the work and materials it had furnished to that point. The owners’ position was that the contractor was banned from asserting a claim because the agreement they had signed failed to comply with the strict provisions of HICPA.
In this case the Pennsylvania Supreme Court ruled that the doctrine of quantum meruit controls; and though the agreement may have been in strict conformity to the provisions of HICPA, it was not going to permit the owners’ property to be enhanced (i.e., “unjustly enriched”) without fair compensation just because of a technical deficiency. The contractor was awarded $37,000 for its efforts.
In reaching its conclusion, the Court observed: “If the General Assembly had seen it fit to modify the right of noncompliant contactors to recover [in quantum meruit], it could have done so.” Because the agreement the parties had executed had failed, the Court deemed it to be irrelevant and instead decreed that the contractor should be compensated fairly under all the circumstances.
– Ken Butera