February 2010
    

A Construction Law Client Advisory:

Whether an Unpaid Subcontractor Can Recover from an Owner Where the Subcontractor Has No Contractual Relationship with the Owner

By: Rebecca A. Ross

Historically, courts would not allow an unpaid subcontractor (or supplier) to assert a claim against an owner with whom they did not deal directly. In other words, where the owner and subcontractor lack "privity of contract." See Bennett Heating & Air Conditioning, Inc. v. NationsBank of Maryland, 674 A.2d 534 (Md. 1996) (acknowledging that the reported decisions involving claims by unpaid subcontractors against owners based on implied contract almost uniformly deny relief). However, in the last several years, cases in numerous states have created exceptions to the general rule and have held that, under certain limited circumstances, a subcontractor can recover from an owner on an implied contract theory (sometimes referred to as an unjust enrichment or quantum meruit theory).

Colorado Update:

As the majority of courts have held, the general rule in Colorado is that an owner is not liable for improvements on its property for which there was no agreement to pay, and that the mere nonpayment of a contract by a general contractor is not enough to require the owner to compensate an unpaid subcontractor.

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Arizona Update:

In Arizona, unjust enrichment exists as a quasi-contractual obligation where services have been performed, the party receiving those services agreed to receive them, and there is an expectation of payment or compensation at the time the services were rendered. Blue Ridge Sewer Improvement District v. Lowery, 718 P.2d 1026 (Ariz.App. 1986).

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Kansas Update:

In Kansas, a subcontractor (or supplier) who has furnished labor or materials for an improvement generally has no right to a monetary judgment against an owner with whom they are not in privity. However, in limited circumstances a subcontractor may bring an unjust enrichment claim against an owner.

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Missouri Update:

In Missouri, whether a subcontractor can recover from an owner under an unjust enrichment theory depends on whether the owner has already paid the general contractor the amount due the general contractor under their express contract. If the owner has paid the general contractor, then the owner’s retention of the services or materials without further payment has been found not to constitute “unjust enrichment.”

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Illinois Update:

In Illinois, a subcontractor may not recover from an owner under an unjust enrichment theory unless there is no adequate remedy at law. The sole remedy of a subcontractor against an owner is under the Illinois Mechanic’s Lien Act.

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For More Information:

For more information, or if you have any questions, please contact the author, a member of our Construction Litigation group or:

• Roy Bash - 816.395.0633 | rbash@polsinelli.com
• Gene Commander - 720.931.1160 | gcommander@polsinelli.com

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