Archive: February 2014

1
Federal Circuit Confirms that Government Has a Broad Duty of Good Faith and Fair Dealing and Declines to Shift Risk of Differing Site Conditions to Contractors
2
Does the Lack of an Enforceable Contract under HICPA Spell No Recovery for Pennsylvania Contractors?

Federal Circuit Confirms that Government Has a Broad Duty of Good Faith and Fair Dealing and Declines to Shift Risk of Differing Site Conditions to Contractors

By Stuart B. Nibley and John P. Estep, K&L Gates, Washington D.C.

In what many will consider a victory for federal government contractors, the U.S. Court of Appeals for the Federal Circuit recently (i) clarified the standard for determining when there is a breach of the implied duty of good faith and fair dealing and (ii) held that certain contractual disclaimer language was insufficient to preclude a contractor from alleging a claim based on differing site conditions.

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Does the Lack of an Enforceable Contract under HICPA Spell No Recovery for Pennsylvania Contractors?

By Jacquelyn S. Celender, K&L Gates, Pittsburgh

The Supreme Court of Pennsylvania is set to decide whether the Home Improvement Consumer Protection Act, 73 Pa. C.S. § 517.1-517.18 (“HICPA”), can bar a contractor from recovery under a theory of quantum meruit in the absence of a valid and enforceable home improvement contract under HICPA. See Shafer Elec. & Constr. v. Mantia, — A.3d –, No. 276 WAL 2013, 2013 WL 5806466 (Pa. Oct. 29, 2013). In the Shafer case, the Superior Court of Pennsylvania reversed a lower court’s dismissal of a mechanics’ lien claim asserted by a contractor against the property of a homeowner on the grounds that the contractor lacked a valid agreement with the homeowner under HICPA. Shafer Elec. & Constr. v. Mantia, 67 A.3d 8 (Pa. Super. Ct. 2013) (relying in part on the Superior Court’s holding in Durst v. Milroy Gen. Contracting, Inc., 52 A.3d 357 (Pa. Super. Ct. 2012)).

The Superior Court rejected the homeowner’s argument that permitting contractors to assert causes of action on a theory of quantum meruit would evade HICPA’s goal of protecting homeowners. Instead, the Superior Court focused on section 517.7(g) of HICPA, which provides:

(g) Contractor’s recovery right.—Nothing in this section shall preclude a contractor who has complied with subsection (a) from the recovery of payment for work performed based on the reasonable value of services which were requested by the owner if a court determines that it would be inequitable to deny such recovery.

Shafer Elec. & Constr., 67 A.3d at 12. The Court noted that “the statute yields an absurd result of providing contractors with an equitable means of recovery under quasi-contract theory, but only whena written contract exists such that quantum meruit recovery is not needed nor allowed by law.” Id. at 13 (emphasis in original). Persuaded by the contractor’s argument that “if this were the intent of the drafters [of the HICPA], to require the contractor to comport with all of the requirements of [section 517.7(a)] to recover in [q]uantum [m]eruit, then the contractor does not need to recover on a [q]uantum [m]eruit theory, for the value of his services, because he would have a valid and enforceable contract on which to rely”, the Court held that the “the General Assembly’s obvious ‘purpose’ in drafting section 517.7(g) was to provide for an equitable remedy in situations where there was no valid and enforceable written contract under section 517.7(a).” Id.

The Supreme Court of Pennsylvania’s decision in Shafer could have important implications for contractors attempting to assert liens under Pennsylvania’s mechanics’ lien law, 49 P.S. § 1101, et seq., and should continue to be closely monitored.

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