Chapter 18 - § 18.8 • IMPLIED CONTRACT

• Jurisdiction: Colorado

§ 18.8 • IMPLIED CONTRACT

Unlike the doctrine of promissory estoppel, which yields an enforceable contract,¹¹⁹ a contract implied in law, such as a claim for unjust enrichment, "does not depend in any way upon a promise or privity between the parties."¹²⁰ A contract implied in law arises "not from consent of the parties, as in the case of contracts, express or implied in fact, but from the law of natural immutable justice and equity."¹²¹ "Thus a 'contract implied in law' is not really a contract at all, and may even be imposed in the face of a clearly expressed contrary intent if justice requires."¹²²

In the construction setting, implied contract claims for unjust enrichment are routinely asserted by subcontractors who are foreclosing on mechanics' liens against owners. Although mechanics' liens are treated in detail elsewhere,¹²³ the Colorado Supreme Court has made it extremely difficult for subcontractors to prevail on unjust enrichment claims against owners on tenant finish projects. In DCB Construction Co. v. Central City Development Co., the court restated the test for recovery under a theory of unjust enrichment as follows:

(1) at plaintiff's expense (2) defendant received a benefit (3) under circumstances that would make it unjust for defendant to retain the benefit without paying.¹²⁴

The court then applied the test to tenant finish construction projects where the tenant had failed to pay the general contractor and concluded that "injustice in this context requires some type of improper, deceitful, or misleading conduct by the landlord."¹²⁵ The fact that the landlord knew about the improvements being made, took a role in the completion of the improvements, required that they be completed in accord with its own specifications, and would retain the improvements upon lease termination was insufficient to make the landlord liable for the reasonable value of the improvements.¹²⁶ Redd Iron, Inc. v. International Sales & Service Corp. addressed the type of showing a sub-subcontractor on a construction project must make to demonstrate that the retention of benefits it provided is "unjust" for purposes of the third prong of the unjust enrichment test.¹²⁷ There, the court determined that a subcontractor must "establish some basis for finding injustice beyond the simple facts that (1) the owner or contractor benefitted from services the subcontractor provided, and (2) the subcontractor was not paid for its work."¹²⁸ Thus, if a subcontractor's lien for...