Promises Kept and Unkept and Quasi Contracts

By Patrick M. Kinnally

December 2019

Recent opinions in Illinois courts have brought into focus contract enforcement in both private and public settings. As to the former, at least as to voluntary unincorporated associations (765 ILCS 115), the likelihood of strict construction as to a party's ability to contract is paramount. 1550 MP Road LLC v. Teamsters Local Union 700, 2019 IL 123046 (" MP Road').

Apparently, it can be different where municipal actors are involved. Our appellate court has restated what appears to be a remedy which is simply restitution. It is called "quasi-contract." Restore Construction Co. V Board of Education, 2019 11.App.(1 st) 181480 (" Restore'); and Karen Stavins EnteIprises v. Community College District 508, 2015 I1.App.(1 st) 150356 ("Stavins'). But before we get to that analysis, let's go back and review what we all learned in our 1 L contracts class in years past.

Here is the template.

(1) You signed a note to repay Mr. Smith $20,000 for the purchase of an unimproved lot in Rochelle, Illinois.

(2) You called Pete, the electrician, to come to your office to fix a breaker panel which supports your computer system, which has gone on the fritz. There is no agreement between you and Pete as to how much he will be paid, if anything.

(3) Emily, a physician, renders necessary medical care for a child due to parental neglect.

The above three scenarios are all examples of contracts. These include: An express contract; an express and implied contract in fact; and, finally, a quasi contract, or a situation where there is no contract at all. The Law of Contracts, Perillo 7th Ed., par. 1.8(c) (2009) 

In the first scenario, an express pact exists for a performance and resulting payment. In the second situation, there is an implied promise to pay for the work that is to be performed. In the third sample, there is no promise, and there is no contract. What has occurred is that a debt has been created even without an agreement to pay. The court fashions a remedy to prevent one party from being unjustly enriched. It is a court-made contract.

In Illinois, there are two types of implied contracts: Those implied in fact and those implied in law. A contract implied in fact contains all of the elements of an express contract, as well as a meeting of the minds. See Bradyv. Finch University, 232I11.Dec. 419 (2nd Dist. 1998) ("Finc/i'). So, Pete the electrician expects to get paid for the reasonable value of his services and materials for repairing the server, even though part of the agreement does not exist. Both parties had a meeting of the minds as to what needed to be done, but did not state an agreed upon price. The owner of the server asked Pete to do the work, so the owner announced an intent to be bound by that promise. Put another way, the facts, circumstances, course of dealing and expressions of the owner manifest an agreement, not only as to the owner, but Pete as well. South Suburban Safeway Lines., Inc., v. Regional Transportation Authority, 166 !II.App.3d 361 (1st Dist. 1988) ("South")

In Emily's situation, there is no contract between Emily and the parents of the child she treated. A contract implied in law or a quasi contract results, regardless of the parties' intentions, based on a duty the court imposes as a remedy. In other words, the court creates the agreement. The essence of a quasi contract is the parents' failure to make an equitable payment for a benefit their child received, which they voluntarily accepted even if they did not request it. Woodfield Lanes v. Village of Schaumburg, 168 !II.App.3d 763(1st Dist. 1988) (" Woodfield')

The caveat to this type of restitutionary remedy is that no claim of a contract implied in law can be alleged when an express contract or contract implied in fact exists between the parties and addresses the same subject matter. Nor can a municipal actor be held liable under an implied contract which violates a statute, its charter, a public policy, or is ultra vires. South. As we shall see, this may not always be what our courts are telling us as advocates. Finch.

It has long been the law in Illinois, no contract or liability may be implied against a municipal corporation where there has been a failure to comply with a statute or ordinance specifying the manner in which an officer or agent can bind the municipal corporation. Said differently, a municipal corporation cannot be obligated upon an alleged implied contract in which it has no authority to engage as a matter of law. South. Thus, in South, the court did not enforce an express agreement between the Regional Transportation Authorization (RTA) and a transit company where the contract was not authorized by a majority of the directors of the RTA before performance under the contract commenced.

In like vein, in MP Road, our Supreme Court held as to voluntary unincorporated associations, that the failure of a labor union officer to obtain the approval of its members before it entered into a substantial and sophisticated lease agreement caused that agreement to become unenforceable.

In MP Road, it was undisputed the labor union officer executed the contract, the union paid rent under the lease, and possessed the property before defaulting under the real estate agreement. Notwithstanding, because the bylaws of the labor organization had a specific requirement that authorization of a majority of the Union's members was required before an expenditure of a substantial nature, the agreement was void from its inception. The court found that, because the organization's members never received notice of the proposed contract and never voted to authorize it, the lease was invalid from its inception.

The Supreme Court found that where a party lacks legal authority to form a contract, the resulting contract is for naught. It cited Grassini v. DuPage Township, 279 !II.App.3d 615 (1996), for the proposition that where a municipality exceeds its statutory authority in entering into an agreement, the municipality's act is ultra vires and the contract is nullified. It does not matter that the other party has performed the agreement; or, that the party who seeks to avoid the agreement did likewise, before breaching it. In this context, a void agreement eviscerates the equitable doctrines of ratification, estoppel and apparent agency to enter into the agreement originally or in the course of the performance of it, each of which the landlord unsuccessfully argued in MP Road The Supreme Court rejected all of the contentions and reversed the Appellate Court and the trial court.

A harsh result? Perhaps. The upshot being that due diligence at the outset of entering into the agreement with a voluntary unincorporated association is paramount. Do your homework.

Restore, however, seems contrary to MP Road, although the defendant was a municipal actor, not a private one.
In May 2014, Proviso East High School ("Proviso") had a fire, causing serious property damage. The beginning of the school year was 3 months away. Proviso, through its authorized official, entered into written agreements with Restore for remediation and restoration. Restore provided services of $7.2 million under the agreements. Proviso provided $5.8 million to Restore before it ceased payment.

Restore sued Proviso for the balance of $1.4 million on a breach of contract theory. Proviso moved to dismiss, claiming the contracts were void ab initio because the Proviso Board failed to take a vote on the expenditures Restore claimed were owed or earned. The Board failed to do so before the agreements were executed. The trial court granted Proviso's motion, holding the contracts were a nullity. The Appellate Court reversed.

To get there, the court found a quasi-contract implied in law, even though Resto re's complaint claimed a breach of contract. Unconvincingly, the Appellate court observed there were no express contracts between the parties, even though the Board's agent signed both of them. Also, it ignored the fact the Proviso Board never approved the agreement. Restore performed the contract, and the Board paid 80 percent of the contract price which became telling.

Respectfully, the Restore tribunal's reliance on Woodfield and Stavins is misplaced. Stavins sought to recover the value of services for nine actors who performed a commercial produced for the defendant community college. The college hired the actors, through Stavins as a talent agent. The actors performed what Stavins hired them to do and the college published and broadcast the actors' work. Stavins specifically alleged the actors had no contract with the college, the college accepted their services and failed to pay them.

Framed differently, the facts of Stavins mirror the exact same ones Emily provided in scenario #3 above. There was no express contract or contract implied in fact. The college received the benefit, was unjustly enriched, so the court ordered a quasi-contract among the parties.

Nor is Woodfield a compelling precedent. In Woodfield, the issue was whether the Village of Schaumburg's failure to collect connection fees payable to the plaintiff developer created a contract implied in law. The court held it did because there was no express agreement between the parties and the developer pleaded a contract implied in law. Contrariwise, Restore had an express contract to perform services of remediation and restoration.

In Restore, the trial court stated: 

You know, under the plain language and the applicable statutes, the proper steps were not taken in the formation of the contract. And I have no doubt that all of the parties believe there was an enforceable contract between the plaintiff and the district during the time periods in question, but that doesn't affect it. 

***
I think Judge McGrath was correct in that observation.

The outcome in Restore is inconsistent with MP Road and disquieting. Perhaps it is the correct result since Restore performed its obligations. It was due the money for the services rendered. Nevertheless, we cannot have a different legal maxim for public and private litigants. We need a singular standard in this area of the law which is clear and unequivocal. Not one that is based on a pleading theory and ignores the actual performance of those entities whom have clearly entered into an agreement which is a guide for their respective actions. If a restitutionary outcome is the correct result, do we need to adorn it with some outdated legal theorem? Otherwise, how can we advise our clients as to what the probable outcome will be? Legal hijinks and platitudes should not be the measure of the work-a-day law for those whom we represent.