Blogs

Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: October 5, 2020

Contract Made With A Municipality That Does Not Comply With Law is Unenforceable, Even Under a Quantum Meruit Theory

On September 22, 2020, Justice Walsh of the Westchester County Commercial Division issued a decision in Universal Eng’g Servs., P.C. v. Industrial Dev. Agency of Mount Vernon, N.Y., 2020 NY Slip Op. 51066(U), holding that a contract made with a municipality that does not comply with law is unenforceable, even under a quantum meruit theory, explaining:

The law is well settled that a municipal contract which does not comply with statutory requirements or local law is invalid and unenforceable. A party contracting with a municipality is chargeable with knowledge of the statutes which regulate its contracting powers and is bound by them. In support of their motion, Defendants contend that for a contract entered into by the City to be valid and enforceable, it must comply with various sections of the City’s Charter, namely: (1) Section 46, which requires that there may not be any appropriation of money without the passage of an ordinance or resolution approved by a majority of the members of the City Council; and (2) Section 73, which requires the approval of the contract by the City Board of Estimate. Plaintiff’s Amended Complaint fails to allege compliance with these requirements. Furthermore, in opposition to Defendants’ motion, Plaintiff fails to refute the City’s noncompliance with these requirements. As such, because Plaintiff’s Amended Complaint fails to allege compliance with the City’s Charter with regard to the City’s purported entry into these agreements, the branch of Defendants’ motion seeking to dismiss Plaintiff’s Fifth Cause of Action for breach of contract against the City shall be granted.

And for the same reasons, Plaintiff’s quasi contract claims against the City fare no better. There cannot be a valid implied contract with a municipality when the Legislature has assigned the authority to enter into contracts to a specific municipal officer or body or has prescribed the manner in which the contract must be approved, and there is no proof that the statutory requirements have been satisfied. As noted by the Second Department in Mid-Atlantic:

Mere acceptance of benefits does not estop a municipal corporation from denying liability for services rendered, where a contract was neither validly entered into nor ratified. The result may seem unjust but any other rule would completely frustrate statutes designed to protect the public from government misconduct or improvidence. The contractor’s option is to withhold his services unless an agreement is executed and approved as the statutes require.

Here, while certain letters and audited financial statements attached to Plaintiff’s Amended Complaint support that the City agreed to have Plaintiff perform services for its Buildings and Public Works Departments, and that Plaintiff dutifully performed such services, such evidence is nevertheless insufficient to establish an implied contract with the City. As pronounced by the New York Court of Appeals, even though a promise to pay may be spelled out from the parties’ conduct, a contract between them may not be implied to provide rough justice and fasten liability when applicable statutes expressly prohibit it. Plaintiff has failed to sufficiently plead facts that would support the narrow exception to these rules set forth by the Fourth Department in Vrooman v Village of Middleville (91 AD2d 833 [4th Dept 1982] lv denied 68 NY2d 610 [1983]). Accordingly, the branches of Defendants’ motion seeking the dismissal of Plaintiff’s Sixth and Seventh Causes of Action shall be granted.

(Internal quotations and citations omitted).

This rule is a harsh one, like the statute of frauds’ requirement that certain contracts be in writing. But the failure to observe these rules can be fatal to a claim. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding the enforceability of a contract.

Click here to subscribe to this or another of Schlam Stone & Dolan’s blogs.

View posts