{"id":1501,"date":"2013-04-04T06:20:07","date_gmt":"2013-04-04T12:20:07","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=1501"},"modified":"2013-04-02T16:20:26","modified_gmt":"2013-04-02T22:20:26","slug":"working-without-a-safety-net-can-subcontractors-and-suppliers-still-sue-an-owner-for-quantum-meruit-and-unjust-enrichment-in-virginia","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/working-without-a-safety-net-can-subcontractors-and-suppliers-still-sue-an-owner-for-quantum-meruit-and-unjust-enrichment-in-virginia\/","title":{"rendered":"Working Without a Safety Net: can Subcontractors and Suppliers still Sue an Owner for Quantum Meruit and Unjust Enrichment in Virginia"},"content":{"rendered":"

Subcontractors and suppliers provide labor, equipment or materials on construction projects without direct contractual relationships with the project owner, the ultimate beneficiary of that work, equipment and materials.\u00a0 In the event of payment disputes, those subcontractors and suppliers will often look directly to the project owner, as the ultimate beneficiary, for payment.\u00a0 Payment may be sought by filing a Mechanic\u2019s Lien and thereafter suing to enforce the lien.\u00a0 To enforce the Mechanic\u2019s Lien, however, the lienor must comply with strict statutory provisions and deadlines.\u00a0 Failure to comply with these statutes often invalidates the lien.\u00a0 Consequently, cautious lienors also include in their enforcement lawsuits a\u00a0 separate claim forquantum meruit<\/em>, meaning \u201cwhat has been earned\u201d, as a safety net in the event their mechanic\u2019s lien action failed.\u00a0 Now, however, as a result of a recent, unpublished Virginia Supreme Court decision, that safety net may be gone.<\/p>\n

In December 2012, the Virginia Supreme Court issued its opinion in\u00a0Smith v. Owens<\/span>, 2012 LEXIS 150 (2012) and limited the ability of a third-party claimant, i.e., one not in a direct contractual relationship such as a subcontractor or supplier with a project owner, to pursue a claim of\u00a0quantum meruit<\/em>.\u00a0 In\u00a0Smith<\/span>, a residential contractor, Owens, and Walter Smith executed a contract for the construction of a home to be built on property jointly owned by Smith and Sara Hill.\u00a0 Hill did not sign the construction contract, but was extensively involved in the design of the home and the construction process.\u00a0 Ultimately, Smith did not pay Owens, and Owens filed suit against Smith for breach of the written contract.\u00a0 Owens also filed suit against Hill, with whom Owens did not have a contract, for\u00a0quantum meruit\u00a0<\/em>recovery on the grounds that she benefited from Owens\u2019 work and should pay him the reasonable value of his services.<\/p>\n

Prior to\u00a0Smith<\/span>, the law in Virginia provided that a plaintiff could not bring a\u00a0quantum meruit\u00a0<\/em>claim against a defendant when an express contract already existed with that\u00a0same<\/strong><\/span>\u00a0defendant.\u00a0 A\u00a0quantum meruit\u00a0<\/em>claim, however, could be brought against a third party not a party to the contract, such as Hill in this case, who allegedly benefited from the plaintiff\u2019s work.\u00a0 In this case, Hill argued that the rule should be expanded to bar\u00a0any<\/span>\u00a0claim for\u00a0quantum meruit\u00a0<\/em>against a party if an express contract for the\u00a0same work\u00a0<\/span>already existed.\u00a0 The trial court rejected Hill\u2019s argument.<\/p>\n

On appeal, the Supreme Court reversed and ruled that the subject matter of the express contract \u2013 not the identities of the parties to the agreement \u2013 determines the viability of a claim for\u00a0quantum meruit<\/em>.\u00a0\u00a0 In other words, if the work that forms the basis for the\u00a0quantum meruit\u00a0<\/em>claim is the same work contemplated by a preexisting written agreement, then the\u00a0quantum meruit\u00a0<\/em>claim is barred.\u00a0 The\u00a0Smith<\/span>\u00a0Court would not imply a contract with Hill when an express contract for the work already existed with Smith.<\/p>\n

Does this ruling mean that subcontractors and suppliers who lose their mechanic\u2019s lien rights are out of a safety net to go against a project owner for payment recovery?\u00a0 Interestingly,\u00a0Smith<\/span>\u00a0is an unpublished Virginia Supreme Court opinion.\u00a0 Although unpublished opinions lack precedential effect, they provide insight into the disposition of the Court and can be predictive of future rulings.\u00a0 To that end, if\u00a0quantum meruit\u00a0<\/em>is precluded when an express contract is present, does the Supreme Court also intend to bar unjust enrichment claims under similar circumstances?\u00a0 Maybe.\u00a0 Does this ruling indicate that the Supreme Court views the Mechanic\u2019s Lien as the only method for an unpaid third party subcontractor or supplier to pursue a project owner in the absence of a direct contract?\u00a0 Perhaps.<\/p>\n

Adding further uncertainty to the answer is the fact that Circuit Courts in Virginia and the Supreme Court of Virginia have used the terms\u00a0quantum meruit<\/em>, implied contract, quasi-contract, and unjust enrichment interchangeably for decades without explanation.\u00a0\u00a0 The terms describe technically distinct causes of action.\u00a0 The use of the terms as synonyms by the Courts may be due to the fact that the desired result of\u00a0quantum meruit<\/em>, implied contract, quasi-contract, and unjust enrichment is the same; i.e., the third party subcontractor or supplier who provides the benefit is paid, and the owner who receives the benefit does not get it for free.<\/p>\n

The widely accepted distinction between claims for\u00a0quantum meruit\u00a0<\/em>and those for unjust enrichment is as follows:\u00a0quantum meruit\u00a0<\/em>is based on a contract \u201cimplied in fact,\u201d and unjust enrichment is based on a contract \u201cimplied in law.\u201d\u00a0 An \u201cimplied in fact\u201d contract is an actual contract that is neither written nor oral, but demonstrated by the actions of the parties.\u00a0 The parties to an implied contract do not articulate the amount of consideration due.\u00a0 As a result, the Court implies just compensation \u2013 or\u00a0quantum meruit\u00a0<\/em>– based on the reasonable value of the work performed.\u00a0 On the other hand, a contract \u201cimplied in law\u201d is often referred to as a claim for \u201cunjust enrichment.\u201d A contract \u201cimplied in law\u201d is not an actual contract, but an obligation implied by the Court to require the recipient of a benefit to pay for its value.<\/p>\n

The question now becomes whether the practice of using these terms interchangeably was intentional or the inadvertent consequence of imprecisely using similar terms.\u00a0 If the Supreme Court intends the terms\u00a0quantum meruit<\/em>, unjust enrichment, implied contract and quasi-contract to be synonyms describing a broad equitable concept to prevent the unjust retention of benefit, then the ruling in\u00a0Smith<\/span>\u00a0probably foretells a blanket limitation on a third\u2013party subcontractor\u2019s or supplier\u2019s remedy against an owner \u2013 in the absence of a direct contractual relationship – to the statutory Mechanic\u2019s Lien.\u00a0 (Of course, we are assuming that the other party who is in privity with the subcontractor or supplier is judgment proof, e.g. bankrupt.) If, however, the Supreme Court draws a distinction between contracts \u201cimplied in fact\u201d and \u201cimplied in law,\u201d then a third-party contractor, not in privity, may still proceed against owners for unjust enrichment based on a quasi-contract theory.\u00a0 Until the Supreme Court of Virginia provides clarification, those parties with Mechanic\u2019s Lien rights should vigilantly guard those rights or risk being unable to recover from project owners.<\/p>\n

Working without a safety net: can subcontractors and suppliers still sue an owner for quantum meruit and unjust enrichment in Virginia – Lexology<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Subcontractors and suppliers provide labor, equipment or materials on construction projects without direct contractual relationships with the project owner, the ultimate beneficiary of that work, equipment and materials.\u00a0 In the event of payment disputes, those subcontractors and suppliers will often look directly to the project owner, as the ultimate beneficiary, for payment.\u00a0 Payment may be… Continue reading Working Without a Safety Net: can Subcontractors and Suppliers still Sue an Owner for Quantum Meruit and Unjust Enrichment in Virginia<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[14,172],"tags":[76,325,326],"class_list":["post-1501","post","type-post","status-publish","format-standard","hentry","category-construction-2","category-construction-law-2","tag-mechanics-lien","tag-quantum-meruit","tag-unjust-enrichment","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nWorking Without a Safety Net: can Subcontractors and Suppliers still Sue an Owner for Quantum Meruit and Unjust Enrichment in Virginia - 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