ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Friday, August 25, 2017

Beware starting work on a property before you own the property

When I poke through recent contracts cases trying to find ones to blog about, I tend to decide pretty quickly whether I want to spend time reading an opinion or not. This recent case out of Virginia, American Demolition and Design v. Pinkston, CL16000199-00 (behind paywall), caught my eye because the very first paragraph sounds like a hypo: 

This case arises out of a contractual negotiation for sale of real property . . . from . . . Pinkston to . . . Sweet. The negotiations never resulted in a final contract for sale of the property and no conveyance of the real property ever resulted. After the parties entered into contractual negotiations, but before the parties terminated contractual dealings, with oral permission from Pinkston, Sweet began preliminary construction on the property for the purpose of improving parts of the farmhouse located on the property. Although Pinkston discovered that Sweet’s work on the property had exceeded the scope of their discussions, Pinkston never stopped Sweet from performing further work on the property. Finally, when Sweet and Pinkston learned that a lien against the property hindered Pinkston from conveying title, Sweet stopped all work on the property. The property was subsequently rendered to be worth only a fraction of what it was previously worth before Sweet began working on the property.

So, naturally, I stopped to read the rest. Sweet brought the suit quantum meruit, for recovery of the value of his work performed on the property.  

The court acknowledged that there was no written contract about Sweet's work on the property, but the parties did make oral agreements on the subject that the court used in evaluating the quasi-contract claim. The work that Sweet performed on the property apparently brought the value of the property down, raising the question of whether it conferred a benefit on Pinkston as is required for recovery. However, the court noted that Pinkston knew Sweet was doing the work and did nothing to prevent him from doing it. In fact, they negotiated that Sweet would do the work. Therefore, the court found the work was a benefit that Sweet conferred on Pinkston with Pinkston's knowledge, despite the effect of the work on the value of the property at issue. 

But mere rendering of the services is not enough to merit recovery. The circumstances also must indicate that it would be inequitable for Pinkston to retain the benefit of Sweet's work without compensating him for it. There was no evidence that the parties ever thought Pinkston would pay Sweet for his labor. It was very clear that Sweet, expecting to buy the property, was in fact performing the work for himself, not Pinkston. Not only did Sweet not expect Pinkston to pay him, he expected to have to pay Pinkston when he bought the house. Therefore, the circumstances did not indicate that Pinkston needed to pay Sweet for his work. 

The case stands as a word of warning: be careful expending time and effort on a piece of real estate before negotiations for it have concluded. 

http://lawprofessors.typepad.com/contractsprof_blog/2017/08/beware-starting-work-on-a-property-before-you-own-the-property.html

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Comments

Thanks, Stacy. Wonderful case -- sounds like the judge paid attention in Contracts class!

Posted by: Frank Snyder | Aug 26, 2017 10:06:09 AM

Which always makes me happy!

Posted by: Stacey | Aug 31, 2017 12:38:35 PM

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