Defending Against a Breach of Contract Claim Made by a Subcontractor

Civil Lawsuit Filed for Breach of Contract by Contractor 

In this particular case, an excavator alleged that he had entered into a contract with a homeowner (Clark & Howell’s client), and that the homeowner still owed the excavator $37,000.00 for services rendered.  The homeowner disputed this claim for two reasons: First, the homeowner claimed that he had retained a general contractor, and that he did not directly contract with or retain any of the subcontractors (including this particular excavator); and second, regardless of who he had in fact contracted with, the homeowner claimed that the general contractors and all of the subcontractors had been paid in full.  The excavator filed a civil lawsuit against the homeowner in York District Court.

After nearly two years of litigation, a three-day bench trial was held before Justice Arthur Brennan in the York County Superior Court.  Clark & Howell successfully defended the homeowner in the lawsuit by using two primary defenses: [1] lack of privity of contract; and [2] the Home Construction Contracts Act.

Contractual Relationship Key

The excavator sought remedies against the homeowner under the “prompt payment statute” (10 M.R.S.A. § 1111, et seq.).  A subcontractor seeking penalties under the prompt payment statute must establish the following elements: (1) The services were performed in accordance with the agreement or understanding of the parties; (2) the subcontractor had invoiced the work; and (3) the homeowner failed to make payment within seven days after receipt of the invoice, or after receipt of the progress or final payment from the owner, whichever is later.  The problem the excavator faced in this case, however, was that he could not establish by a preponderance of the evidence that he in fact entered into a contract with the homeowner.  The homeowner, on the other hand, was able to establish that a contractual relationship had been established between him and a general contractor, and that the general contractor was paid in full for all of the services rendered on the construction project.

Home Construction Contracts Act

The homeowner also relied upon the Home Construction Contracts Act as a defense in the alternative.  The Home Construction Contracts Act (the “Act”), pursuant to 10 M.R.S.A. 1486, et seq., was enacted as Maine law in 1987.  The Act was designed to provide added protection to homeowners in their business dealings with contractors.  As amended, the Act now requires that any home construction contract that involves labor or materials in excess of $3,000.00 must be in writing, and must be signed by the contractor and the homeowner (or lessee).  The Act lays out specific provisions and content that must be included in a home construction contract, and failure to comply with the Act can result in monetary sanctions and/or a finding by the court that the contractor has violated the Maine Unfair Trade Practices Act.  Violating the Maine Unfair Trade Practices Act subjects a person or business to additional possible monetary sanctions, and it may require a liable party to pay the prevailing party’s attorney’s fees.

The Act defines a “home construction contract” as a “contract to build, remodel or repair a residence, including not only structural work but also electrical, plumbing and heating work; carpeting; window replacements; and other nonstructural work.” 10 M.R.S.A. § 1486(4).  The Maine Supreme Court, however, has expanded and clarified that definition to include foundation, excavation and septic system installation. Parker v. Ayre, 612 A.2d 1283, 1284 (Me. 1992).  This expanded definition certainly helped our client in this case, as it meant that even had the excavator directly contracted with the homeowner, the contractual relationship would have been governed by the Act. 

Judge Ruled in Our Client's Favor

Ultimately, the Judge did not need to address the Home Construction Contracts Act in his decision since the Judge determined that no contractual relationship existed between the excavator and the homeowner.  The Judge concluded that the excavator would need to pursue a lawsuit against the general contractor, and not the homeowner, to reclaim any unpaid money.  The Judge found in the homeowner’s favor and awarded him costs for defending against the lawsuit.