THE HOME-BUILDER’S CONTRACT WAS INVALID BECAUSE IT DID NOT COMPLY WITH THE GENERAL BUSINESS LAW, THE HOMEOWNERS’ BREACH OF CONTRACT COUNTERCLAIM SHOULD NOT HAVE BEEN DISMISSED ON THAT GROUND HOWEVER; CONTRACTOR ENTITLED TO RECOVER IN QUANTUM MERUIT IF, UPON REMITTAL, IT IS DETERMINED THE CONTRACTOR’S BREACH, IF ANY, WAS NOT SUBSTANTIAL (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court, determined the plaintiff contractor’s breach of contract cause of action against defendants-homeowners was properly dismissed because the contract to build the home did not comply with General Business Law 771. The defendants-homeowners refused to make the final payment of approximate $39,000 upon completion of the home, alleging the home was not complete and was not up to code. The homeowners’ counterclaim for breach of contract should not have been dismissed because General Business Law 771 applies only to contractors. The contractor’s quantum meruit cause of action was not precluded by the contractor’s failure to comply with the General Business Law. The agreed price of the work in the “contract” was evidence of the value of the work done by the contractor, even though the contract itself was invalid. The matter was sent back for determination of the homeowners’ breach of contract cause of action, and a determination of whether the contractor committed a substantial breach of the contract, which would preclude the quantum meruit cause of action:

“The elements of a cause of action sounding in quantum meruit are (1) performance of services in good faith, (2) acceptance of services by the person to whom they are rendered, (3) expectation of compensation therefor, and (4) reasonable value of the services rendered” … . Defendants’ argument centers around plaintiff’s failure to establish the fourth element. In its decision, the court stated that, “[a]lthough there was no direct evidence presented regarding the reasonable value of the work performed, the parties’ agreement can furnish evidence of such value.” We discern no error in the court so holding, as “an unenforceable writing may provide evidence of the value of services rendered in quantum meruit” … . …

… [O]on remittal, should the court find that plaintiff breached the contract, it must then also decide if the breach was substantial, and, if so, plaintiff is precluded from recovering in quantum meruit … . Conversely, if the court finds that plaintiff’s breach of contract was not substantial, plaintiff is not precluded from quantum meruit recovery, and the damages due to defendants for plaintiff’s breach of the contract must be offset by plaintiff’s award … . Grey’s Woodworks, Inc. v Witte, 2019 NY Slip Op 04525, Third Dept 6-6-19