Second District Recognizes Possible New Theory of Recovery for Unpaid Subcontractors
April 21, 2015
In a September 2014 decision, C. Szabo Contracting, Inc. v. Lorig Construction Co., 2014 IL App (2d) 131328, the Second District recognized the ability of a sub-subcontractor to recover on a quasi-contract unjust enrichment theory against a general contractor who had not paid anyone for work performed on a project. In Szabo, the plaintiff, Szabo Contracting, had performed pipe-jacking work on a large project on Interstate 355 pursuant to a contract with a sub-contractor. Following the completion of the work, the defendant general contractor on the project, Lorig Construction, did not pay Szabo or the sub-contractor for the work. Szabo filed suit. At the trial court level, the trial court judge entered judgment in favor of the sub-subcontractor in the amount owed, finding that it would violate the principles of justice, equity, and good conscience for the general contractor to retain the benefit without anyone paying for it. The defendant appealed.
On appeal, the Second District recognized that the remedy of unjust enrichment based on a quasi-contract is generally not available when there is an express contract concerning the subject matter. In such a situation, the lawsuit must generally be between the parties to the contract. However, the court noted that the parties in the case seemed to agree that, despite the general rule, quasi-contractual relief could be available despite the existence of an express contract when a general contractor either has enticed a sub-subcontractor to perform or has given a sub-subcontractor a reasonable expectation of payment. The court reviewed the facts of the case and found that the facts did not establish that the defendant general contractor had enticed Szabo to do the work or guaranteed payment.
The court then went on to consider whether the sub-subcontractor was entitled to quasi-contractual relief because the general contractor received the performance it had requested but paid no one for it, finding that the general contractor should pay under an unjust enrichment theory. The court found it most important that the general contractor had received the exact performance it requested at the price it had agreed to pay for the work. Moreover, the general contractor had not disputed that it had paid no one for the work. Therefore, requiring the general contractor to pay had not resulted in any unfairness or a "forced exchange."
The Szabo case is important because it represents an expansion of the ability for subcontractors and sub-subcontractors to obtain payment for work performed. The court's analysis in Szabo was very fact-intensive, so any entity that believes that it may be able to recover under such a theory should contact counsel to discuss the facts of its case. Please contact our attorneys if you have any questions.