Wednesday, February 17, 2010

The Illinois Home Repair and Remodeling Act - The 2nd District

We're up to part seven in a series of posts on the Illinois Home Repair and Remodeling Act (HRRA).  Here are some quick links to the previous posts for reference:

1) Introduction
2) Statute
3) Illinois Supreme Court opinion
4) The 5th District
5) The 4th District
6) The 1st District

Next we look at the Second District.  Here's the map of the Illinois Appellate Districts.  The Second District is the northernmost district in Illinois, extending from Lake County to Jo Daviess and Carol counties.  The court meets in Elgin in Kane County.

The Second District has issued two opinions involving the HRRA.  We have already discussed one of these cases - MD Electrical Contractors, Inc. v. Abrams, which is the only HRRA case to date to have been heard by the Illinois Supreme Court.1  The other Second District HRRA opinion was published in September 2009, Artisan Design Build, Inc. v. Bilstrom.2

In Artisan, the following facts were alleged by the plaintiff contractor.  The contractor and the homeowners had entered into a written home remodeling contract for approximately $500,000.  As the work progressed, the parties subsequently agreed to eight change orders.  After paying on six draws, the homeowners failed to pay the seventh draw.  The contractor alleged that it had substantially completed the project, at which time the homeowners locked the contractor out of the project and advised it that they had hired another contractor to finish the work.  The contractor sued the homeowners for breach of contract, mechanics lien foreclosure, and unjust enrichment, claiming an amount owed under the contract of approximately $200,000.  The homeowners sought to have the case dismissed because the contractor had violated the HRRA, primarily by not providing the required consumer rights brochure, and the trial court granted their motion to dismiss.    In addition, the contract contained a mandatory arbitration clause.  After filing the complaint, the contractor also submitted a claim to the arbitration organization named in the agreement.  The trial court ruled that the contractor had waived the arbitration clause by first filing the lawsuit.

On appeal, the Second District Appellate Court considered the issue of whether a contractor's failure to provide the brochure was alone a complete defense for the homeowner to all legal and equitable claims brought by the contractor. The court noted that Section 20 of the HRRA, which is the paragraph requiring the contractor to distribute the brochure, does not indicate that failure to comply constitutes an "unlawful act" as is indicated for certain other violations of the HRRA.  Instead, the brochure itself merely advises homeowners to consult the State's Attorney or Attorney General if they feel they have been defrauded.  The court also noted that under Section 35(b) of the HRRA, any violation of the HRRA, including the contractor's failure to provide the required brochure, could give rise to a consumer claim under the Consumer Fraud and Deceptive Business Practices Act (CFDBPA).  The court held that a contractor's failure to provide the HRRA consumer rights brochure to the homeowner does not vitiate the contractor's right to recover in equity or law.

Regarding the arbitration clause, the court noted that the contractor had failed to have the homeowners sign in the margin next to the clause and indicate "accept" or "reject," thus rendering the clause invalid under the HRRA.  It appears likely that the contract in question was based on an American Institute of Architects (AIA) industry standard form (I believe it was AIA form A191-1996, Owner-Design/Builder).

1.  MD Elect. Contractors, Inc. v. Abrams, 228 Ill.2d 281 (2008).
2.  Artisan Design Build, Inc. v. Bilstrom, No. 2-08-0855, __ N.E.2d __, 2009 WL 3052362 (2009).

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