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Indiana Court of Appeals holds that a contractor’s failure to comply with the Home Improvement Contracts Act did not prevent its claim for unjust enrichment and on its mechanic’s lien.

January 26, 2012adminLegal News0

In Kevin Walsh v. Chris Sweeney Construction, Inc., the Indiana Court of Appeals denied a homeowner’s argument that a contractor’s failure to comply with the Home Improvements Contact Act (“HICA”) should preclude the contractor from recovering for its unpaid work on the theory of unjust enrichment and on its mechanic’s lien.

Facts: Chris Sweeney Construction, Inc. (“CSCI”) provided a quote to Kevin Walsh to perform various remodeling work on his home.  Walsh agreed to the price, and CSCI performed the work—but it did not execute a written contract.  When a dispute arose over the work, CSCI recorded a mechanic’s lien on the property for $4,150 in unpaid work.

HICA generally requires a home improvement contractor to provide a consumer with a written home improvement contract containing certain provisions.  At the bench trial, CSCI only pursued claims on its mechanic’s lien and unjust enrichment, knowing that it would not be able to prevail on its breach of contract claim because of its failure to comply with HICA. Walsh filed a counterclaim based on CSCI’s violation of HICA.

The trial court held that CSCI was entitled to the unpaid amount plus its attorney’s fees (under Indiana mechanic’s lien act). Walsh appealed and argued that because HICA prevented a breach of contract claim, CSC should also be precluded from recovering on a theory of unjust enrichment or under the mechanic’s lien.

Decision: The Indiana Court of Appeals affirmed the trial court’s decision. In the absence of a contract, a party may recover under a theory of unjust enrichment—an equitable doctrine that permits recovery when the circumstances are such that justice requires recovery as though there has been a promise.  A mechanic’s lien is equitable in nature and is based upon a theory of unjust enrichment. The Appellate Court found that it would be unjust for Walsh to retain the benefit of CSCI’s services despite CSCI’s non-compliance with HICA.

Walsh also lost on his counterclaim for violating HICA.  HICA provides that a supplier’s failure to give the consumer a written contract is a deceptive act. However, to establish entitlement to those remedies, the homeowner must show that the deceptive act was either uncured, meaning that notice was given and the deceptive act was not cured, or incurable, meaning that the supplier acted with intent to defraud or mislead the consumer. Walsh offered no evidence that he notified CSCI of its deceptive act or offered it the opportunity to cure the deceptive act.  The Court also found that CSCI’s deceptive act was not willful or intentional and that it was not part of a scheme, artifice, or device intended to defraud or mislead Walsh.

The Walsh case is “unpublished,” which means that it cannot be regarded as precedent for other cases; but it likely illuminates the Court’s approach to a contractor’s non-compliance with HICA if there is no evidence of intent to defraud or mislead.  Nevertheless, home improvement contractors should ensure that their contracts comply with Indiana law.

By:  Roy Rodabaugh

Our construction litigation team consists of Roy, Mike Cavosie, and Theresa Ringle.

 

 

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