School district owes contractor for work provided under invalid contract

Government and public work contracts can be difficult for contractors given all the rules and requirements that exist. If a public entity doesn’t follow certain procedures, a contractor may not receive payment even if it performed flawlessly under its contract. In a recent decision by the Illinois Supreme Court, Restore Construction Company, Inc. v. Board of Education of Proviso THSD 209, the court ruled that the Proviso Township School District must pay contractor Restore Construction (Restore) $1.4 million for work authorized by its superintendent and state financial supervisor, despite the contracts never being competitively bid or the school board never formally voting and approving the contract.

In 2014, Restore was hired by the superintendent of Proviso Township High School District 209 (District) to perform emergency repairs to the high school after a large fire in the building. The superintendent executed two contracts with Restore, and Restore proceeded with the work. However, after Restore completed the $7.27 million project, the District refused to pay Restore the remaining $1.4 million on the contract. The District argued that the contracts were void because they were not competitively bid and were entered into without proper approval by the school board as required by law. Restore filed suit against the District.

The Illinois Supreme Court majority found the District had approved the contract informally:

“While no vote was taken, the board was fully aware of Restore’s work, and never objected or brought it up for discussion during the months the work was underway...Where a contract has been made in a way that does not conform to the law but is of the type that was within the power of the municipal corporation to make, the contract has been performed in good faith, and the municipal corporation has accepted its benefits, the municipality cannot invoke its own failure to comply with legal requirements as basis for defeating recovery.”

The court concluded that the District could not use the invalid contracts as a defense to avoid paying for the work performed. The District had the power to enter into contracts for such services, but did not follow the required procedures. To allow the District to benefit from its own failure and take advantage of its own misconduct would have been unjust. The court granted Restore’s claims for quantum meruit.

For the contractors, this case reinforces the importance of ensuring that all procedural loopholes for contract formation with a government or public entity have been satisfied. No contractor wants to wait almost six years for payment and be forced to incur significant attorney fees to get the payment. For the government and public entity, the takeaway is that just because the required procedures for contract formation are not followed it does not mean the contract will not be enforceable.