�4.3 Who it covers � can a business be a covered consumer

While the CFDPA was specifically enacted to protect consumers from fraudulent business conduct, the Act has been extended by Illinois courts to include business to business transactions.[2] Thus the Act protects businesses who purchase products as consumers or services for their own end use. [3]

The Act also protects businesses when the complained of conduct �involves trade practices addressed to the market generally or otherwise implicates consumer protection concerns.� [4] In Downers Grove Volkswagen, Inc. v. Wigglesworth Imports, Inc., the Second District noted the CFDPA applied in a dispute between two automobile dealerships who were not consumers of each others products or services. In Downers Grove, the defendant allegedly distributed 15,000 brochures to individual consumers with alleged false statements regarding the plaintiff�s business practices.[5] The court held that businesses can sue under the CFDPA, when another business deceives customers and injures their competitiveness.[6]

However, in Lake County Grading Company of Libertyville, Inc. v. Advance Mechanical Contractors, Inc.,[7] it was held that the CFDPA did not apply to a dispute between a construction subcontractor and contractor over extra work costs on a sewer line since the complaint did not implicate consumer protection concerns.[8] The Illinois Appellate Court, Second District ruled that the dispute between the two construction companies was merely for breach of their contract and that the two companies were not consumers of each other�s goods or services.[9] The court reasoned that where there is a dispute between two businesses that are not consumers, the test is �whether the alleged (fraudulent) conduct involves trade practices addressed to the market generally or otherwise implicates consumer protection concerns.�[10] Therefore, the court found no consumer interests in a construction contract between a general contractor and its subcontractor.[11]

Similarly, in Direct Communications v. Horizon Retail Construction, Inc., the United States District Court for the Northern District of Illinois ruled that a CFDPA claim by a business requires a showing by the plaintiff of a consumer nexus.[12] In Direct, a retailer sued a general contractor under the Act alleging the general contractor knew at the time it entered a construction contract with Direct that it could not fulfill its contract requirements. [13]Direct alleged it did not need to comply with consumer protection concerns since it was a consumer of Horizon�s contractor services.[14] However, the court citing Lake County Grading reasoned that this would turn every common business dispute into a violation of the CFDPA which was not the intent of the Act. Therefore, a business must show a deceptive practice directed to the market generally or one that implicated consumer protection concerns to have a claim under the Act.[15]

�4.4 What are violations of the Act - Deceptive practices � Section 2

The CFDPA seeks to restrain and prohibit unfair methods of competition and unfair or deceptive acts including the use of fraud, deception, false promise or pretense, misrepresentation or concealment, suppression or omission of material facts in the conduct of any trade or commerce specifically dealing with consumers.[16]

Generally, to prevail on a CFDPA claim a plaintiff must show: (1) a deceptive act or practice by the defendant; (2) defendant�s intent that the plaintiff rely on the deception; (3) an occurrence of deception in the course of conduct involving trade or commerce; (4) actual damages to the plaintiff ; and (5) proof that the damages were caused by the deceptive act or acts.[17] Unlike common law fraud where an intent to defraud is required, under the CFPDA innocent misrepresentations may be actionable.[18]

In Falcon Associates, Inc. v. Cox, a homebuilder � vendor was potentially liable to the purchasers of a home where the purchasers relied on the quality of his model homes as to what they were purchasing.[19] This was true even if the defendant did not intend to deceive them. Once the purchasers took possession of the home they encountered all kinds of construction problems including wind blowing through their home when all the doors and windows were closed, the home not having R-19 insulation like the model home, and the roof needing complete replacement.[20] The defendant claimed they never intentionally deceived anyone, they attempted to correct the problems with the home and that this was merely a breach of contract action.[21] The Fifth District court ruled that innocent misrepresentations may be actionable.[22] The buyer did not need to show the seller intended to deceive, but must show the seller intended the buyer to rely on some act or representation.[23] In this case the court found that seller intended for the buyers to rely on the construction quality of the model home and his promise of R-19 insulation throughout most of the home and thus the requirement of intent was established.[24]

In the Second District, the Attorney General filed a CFPDA claim for shoddy work performed on a consumers residence by a plumbing, heating and air conditioning business. In People ex rel. Hartigan v. Knecht Services, the contractor was accused of engaging in unfair and deceptive practices with respect to their advertising, servicing and charging of customers for plumbing. heating and air conditioning services.[25] The contractor placed a yellow pages advertisement that stated �HONESTY AND MINIMUM CHARGE IS OUR POLICY� in the plumbing contractor�s section of the phone book.[26] Evidence showed the contractor used untrained servicemen, performed work in an unworkmanlike manner, used intimidation to collect payment, performed unnecessary repairs, charged for the work of two servicemen when only one performed and excessively charged consumers.[27] The court ruled in plaintiff�s favor reasoning the contractors advertisements were far from accurate.[28] Knecht had no licensed plumbers, either employees or officers, yet represented his employees as qualified to perform the work.[29] Its statement as to �minimum charges� created a misunderstanding as to how much would be charged for their services and was therefore deceptive.[30]

Another instance where the Attorney General sued a home remodeling company is People ex rel. Hartigan v. All American and Construction Co, Inc.[31] In All American, the Attorney General sued the corporate officers of the home remodeling company alleging CFDPA violations.[32] They were sued in their corporate capacity since the company officers managed, condoned, controlled and directed deceptive business practices of the company.[33] The deceptive practices included ignoring four different consumers� complaints regarding warranty defects and performing contract work in an unworkmanlike manner.[34] The Court ruled that the Attorney General stated a cause of action under the Act by alleging the corporation was negligent in performing its work and failed to remedy the defects. The court found that the complaint need not allege the underlying facts of each occasion.[35]

Even if there is a deception, the consumer must prove that the deception caused the injury for there to be an actionable claim under the Act. In Zankle v. Queen Anne Landscaping, the Second District court found that a landscaping contractor, who promised to use a �rock picker� to find and remove rocks from a consumer�s lawn, failed to remove three tons of rocks that were removed by a completion contractor.[36] Although the consumer alleged the original landscaper lied and was deceptive in promising to use the �rock picker�, the court found that the original contractor was only liable for a breach of contract and not a violation of the CFDPA.[37] The court held that since the completion contractor also did not use a �rock picker�, yet still managed to remove three tons of rock and otherwise performed satisfactorily, that the deception did not proximately cause plaintiff�s injury.[38] The court stated, �what the plaintiff calls �consumer fraud� or �deception� is merely defendants failure to abide by their contractual obligations.�[39]

In Notaro Homes, Inc. v. Chicago Title Insurance Company, a developer unsuccessfully sued a title company for failure to apprise the developer of changes in local zoning amendments that effectively denied the developer the opportunity to build a residential building as it intended.[40] The developer sued the title company alleging, among other claims, that the title company violated the CFDPA for failure to disclose new recorded amendments against the property in its title policy.[41] In ruling against the developer on the CFDPA claim, the court reasoned that the developer was a sophisticated business and could have checked with the local governing authority as to new encumbrances placed on its property.[42] The court stated the title company�s failure to disclose was an omission of law discoverable by the plaintiff and not an omission of material fact.[43] Therefore, the title company did not violate the Act.[44]

�4.5 Contract signed at consumer�s residence � Right of Rescission Section 2B

If there is a sale of merchandise valued at $25 or more made under a written contract by a seller to a consumer at the consumer�s residence then pursuant to the CFDPA, that consumer has three full business days after signing the contract in which to void the contract by notifying the seller and returning the merchandise.[45] The seller is required to give a receipt or contact to the purchaser at the time of signing.[46] The contract has to contain a �Notice of Cancellation� on the contract which must include the following language:

�YOU, THE CONSUMER MAY CANCEL THIS TRANSACTION AT ANY TIME PRIOR TO MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DATE OF THIS TRANSACTION. SEE THE ATTACHED NOTICE OF CANCELLATION FORM FOR AN EXPLANATION OF THIS RIGHT.�[47]

Per the CFDPA, a Notice of Cancellation also needs to be attached to the receipt or contract. [48] The Notice of Cancellation needs to be presented to the consumer in the following form:

NOTICE OF CANCELLATION

(enter date of transaction)

��..

(Date)

YOU MAY CANCEL THIS TRANSACTION, WITHOUT ANY PENALTY OR OBLIGATION, WITHIN 3 BUSINESS DAYS FROM THE ABOVE DATE.

IF YOU CANCEL, ANY PROPERTY TRADED IN, ANY PAYMENTS MADE BY YOU, AND ANY NEGOTIABLE INSTRUMENT EXECUTED BY YOU UNDER THE CONTRACT OR TRANSACTION WILL BE RETURNED WITHIN 10 BUSINESS DAYS FOLLOWING RECEIPT BY THE SELLER OF YOUR CANCELLATION NOTICE, AND ANY SECURITY INTEREST ARISING OUT OF THE TRANSACTION WILL BE CANCELLED.

IF YOU CANCEL, YOU MUST MAKE AVAILABLE TO THE SELLER AT YOUR RESIDENCE IN SUBSTANTIALLY AS GOOD A CONDITION AS WHEN RECEIVED, ANY GOODS DELIVERED TO YOU UNDER THIS CONTRACT OR TRANSACTION, OR YOU MAY IF YOU WISH, COMPLY WITH THE INSTRUCTIONS OF THE SELLER REGARDING THE RETURN SHIPMENT OF THE GOODS AT THE SELLER�S EXPENSE AND RISK.

IF YOU MAKE THE GOODS AVAILABLE TO THE SELLER AND THE SELLER DOES NOT PICK THEM UP WITHIN 20 DAYS OF THE DATE OF YOUR NOTICE OF CANCELLATION, YOU MAY RETAIN OR DISPOSE OF THE GOODS WITHOUT ANY FURTHER OBLIGATION. IF YOU FAIL TO MAKE THE GOODS AVAILABLE TO THE SELLER, OR IF YOU AGREE TO RETURN THE GOODS TO THE SELLER AND FAIL TO DO SO, THEN YOU REMAIN LIABLE FOR PERFORMANCE OF ALL OBLIGATIONS UNDER THE CONTRACT.

TO CANCEL THIS TRANSACTION, MAIL OR DELIVER A SIGNED AND DATED COPYOF THIS CANCELLATION NOTICE OR ANY OTHER WRITTEN NOTICE, OR SEND A TELEGRAM, TO (Name of seller), AT (address of seller�s place of business) NOT LATER THAN MIDNIGHT OF (date).

I HEREBY CANCEL THIS TRANSACTION.

(Date)��

(Buyer�s signature) [49]

The three day period does not start until the consumer is given a �Notice of Cancellation�. If the consumer sends notice as prescribed, then the seller must return the full amount of any payments made.[50]

It would be unlawful for a seller to: (a) fail to complete the contact information in the �Notice of Cancellation�;[51] (b) include in the contract waivers of the right to cancel;[52] (c) fail to tell the consumer at the time of signing the contract of their right to cancel within three days;[53] (d) misrepresent the consumers right to cancel;[54] (e) use coercion to interfere with the consumer�s rights under the CFDPA;[55] (f) fail to honor a notice of cancellation within 10 days and fail to refund payments made by the consumer, return goods traded in, in substantially the same condition as when received by the person, and cancel and return any negotiable instruments tendered by the consumer under the contract;[56] (g) sell the consumer�s debt to a collection agency prior to midnight of the fifth business day following the day the contract was signed or the goods or services were received;[57] or (h) fail to notify the consumer within ten days of receiving notice of cancellation, whether the seller intends to repossess the goods.[58]

The CFDPA does not apply to transactions which are made by a consumer: (a) visiting a retail establishment; (b) under the Consumer Credit Protection Act; (c) where the consumer initiated contact to meet a bona fide personal emergency; (d) entirely over the telephone or mail; (e) who initiated the contact and invited the seller to his residence; (f) that apply to sales or rental of real property, sales of insurance or commodities; and (g) with a loan broker where the consumer made first contact with the broker.[59]

�4.6 Non-English language transaction; contracts � Section 2N

If a person conducts a business transaction, in a language other than English, and uses an interpreter in discussing the terms and condition of the contract, the retailer must have the consumer and interpreter sign the following forms:[60]

I, (name of consumer), used (name of interpreter) to act as my interpreter during this retail transaction or these negotiations. The obligations of the contract or other written agreement were explained to me in my native language by the interpreter. I understand the contract or other written agreement.

(signature of consumer)

(relationship of interpreter to consumer)

I, (name of interpreter), acted as an interpreter during this retail transaction of these negotiations. The obligations of the contract or other written agreement were explained to (name of consumer) in the consumer�s native language. I understand the contract or other written agreement.

(signature of interpreter)

(relationship of interpreter to consumer)[61]

Similarly, if a transaction is conducted in a language other than English, and results in a written contract, and the retailer or one of its employees acted as an interpreter, the retailer must have the consumer sign the following form in the consumer�s native language:[62]

This retail transaction or these negotiations were conducted in (language), which is my native language. I voluntarily choose to have the retailer act as my interpreter during the negotiations. The obligations of the contract or other written agreement were explained to me in my native language. I understand the contract or other written agreement.

(signature of consumer) (signature of retailer)[63]

The CFDPA specifically excludes realtors and credit card transactions but not mortgage brokers who often sell residential mortgages to Spanish speaking consumers.[64] There may be possible CFDPA actions against mortgage brokers or lenders who fail to follow these mandatory procedures, although lenders will probably argue that their residential loans are not �retail transactions� and attempt to bypass these foreign language requirements of the CFDPA.[65]

�4.7 Notification of change in name and refusal to commence or complete work - Section 2Q

The CFDPA specifically targets unscrupulous residential contractors by requiring that any person or company in the business of making home improvements or repairs shall operate their business under their real name, assumed corporate name under the Business Corporation Act of 1983 or an assumed business name under the Assumed Business Name Act..[66] Violations of this requirement shall expose the offending party to a possible criminal charges of at least a Class A misdemeanor.[67]

If a business does home repair, and has entered into a contract for home repair with a consumer, he or she must notify the consumer of any changes in its business name or an address change within 10 days after the change in address or name.[68]

If a business does home repair, and fails to start or complete work under a contract, then it must return the down payment and any additional payments made by the consumer or its agents within 10 days after a written demand is made by certified mail.[69] From the plain reading of the statute this suggests that even if a remodeling job was ninety percent complete and the contractor failed to complete the work, the contractor would need to return all monies paid including the deposit if the consumer properly made its demand under the statute.

�4.8 Damages for failure to comply

The CFDPA allows for private rights of action for any person who suffers actual damages under the Act.[70] The court may, in its discretion, award any other relief it deems proper.[71] Courts may award compensatory and punitive damages for violations of the CFDPA.

In Borcherding v. Anderson Remodeling Company, Inc., the Second District court reaffirmed default judgements for compensatory and punitive damages against a renovation contractor and denied the contractor�s petition for relief from judgement.[72] The court ruled that a renovation contractor�s willful and false statements that it was a reputable and reliable company combined with a homeowner�s reliance on these statements, which resulted in damages to the homeowners, was sufficient to plead a violation of the CFDPA.[73] On a motion for default judgement, the trial court entered judgement against the defendants for $5,600 in compensatory damages, $18,000 in punitive damages and $2,000 in attorneys fees.[74] Although the defendants attempted to void the judgment, the appellate court found the contractor failed to properly and diligently petition for leave to vacate the judgment and the award by the trial court was not overturned.[75] Clearly, this case stands for the proposition that courts will award compensatory and punitive damages on a CFDPA claim and defendants must always diligently defend themselves.

In Ekl v. Knecht,[76] another Second District court allowed compensatory damages of $307 and punitive damages of $4,700 against a residential plumbing contractor for violating the CFDPA. Before negotiating an actual price to repair a blocked pipe in the plaintiff�s home, the contractor repaired a blocked pipe in the consumer�s home. When the consumer objected to the amount charged,[77] the contractor threatened to undue the work that was done and also threatened to turn off her water supply.[78] The court awarded punitive damages against the contractor based on the threats to the consumer.[79] The court found the contractor deprived the consumer of her bargaining power and forced her to pay an unreasonable price by his unconscionable and unlawful threats.[80] The court set forth three factors to determine whether the contractors actions were unfair under the Act:

(1) whether the practice even if not unlawful offends public policy as established by statutes, the common law or otherwise;

(2) whether it is immoral, unethical, oppressive or unscrupulous; and

(3) whether it results in substantial injury to consumers.[81]

Consequential damages may be waived on a CFDPA claim in a dispute between two businesses as long as the waiver was not unconscionable. In Lefebure Intergraphics v. Sanden Machine Limited,[82] plaintiff sued a printing press manufacturer for misrepresentations under the Act. Plaintiff sued for lost profits and consequential damages. The manufacturer raised the waiver of consequential damages contained in the purchase contract as a defense.[83] The United States District Court for the Northern District of Illinois held that a consequential claim waiver between sophisticated businesses was not unconscionable. The businesses were free to contract and determine the scope of the remedy between them. Therefore the court upheld the waiver of consequential damages and dismissed the claims of plaintiff for lost profits and consequential damages.

The CFDPA provides for harsh civil penalties to those who violate the CFDPA�s provisions. Specifically, the Act allows the Attorney General or State�s Attorney the power to prosecute any suspected violators in the name of the People of the State.[84] Preliminary or permanent injunctive power is allowed by the State against violators.[85] Among other remedies the Act allows for restitution against the harmed parties[86] and allows the State prosecutors to claim civil penalties for $50,000 against any person found by the Court to have engaged in prohibited acts.[87] If an intent to defraud is determined to have been perpetrated by the offender then the Act allows for a penalty of $50,000 per violation.[88]

In addition to the above, if the offender is found to have acted against a person 65 years of age or older , courts may impose additional penalties of $50,000 for each violation.[89] To determine the amount of penalties for violations against persons 65 years of age or older the courts consider whether : (1) defendant�s conduct was willful;(2) whether the defendant knew or should have known his conduct was directed against someone 65 years of age or older and (3) whether the person 65 years of age or older was more vulnerable to defendant�s conduct due to his/ her age, poor health and infirmity.[90]

�4.8.1 Liability for attorneys fees

The CFDPA allows for the recovery of reasonable attorney�s fees and costs to the prevailing party in a suit brought under the CFDPA.[91]

The Act provides that the court may award the prevailing party its attorneys� fees. However, in Krautsack v. Anderson,[92] the Illinois Supreme Court ruled that a trial court must make a threshold finding of bad faith by the plaintiff to award a prevailing defendant attorney�s fees under the Act.[93] The purpose being to deter bad-faith conduct by a plaintiff and to reimburse a defendant if that happens.[94] The same court stated a trial court need not make a threshold finding of bad faith to award attorney�s fees to a prevailing plaintiff.[95] The logic being consumers would be discouraged from bringing suit for consumer fraud if their recovery was consumed by attorney�s fees or their damages were insubstantial.[96] The court ruled that an award of attorney�s fees is discretionary by the trial court and not mandatory.[97]

Factors that the courts look to in awarding attorneys� fees include:

(1) the degree of the opposing party�s culpability or bad faith;

(2) the ability of the opposing party to satisfy an award of fees;

(3) whether an award of fees against the opposing party would deter others from acting under similar circumstances;

(4) whether the party requesting fees sought to benefit all consumers or businesses or to resolve a significant legal question regarding the Act; and

(5) the relative merits of the parties� positions[98]

The statutory remedies for payment of reasonable attorneys fees allowed by the CFDPA have been incorporated into the Home Repair and Remodeling Act, as well.[99]

Thus, upon prevailing, a consumer plaintiff is normally awarded attorneys� fees. Attorneys� fees have even been awarded in cases where there were innocent misrepresentations of fact made by the defendant.[100] However, the court has discretion to deny attorneys fees where factors indicate otherwise. Thus, a plaintiff who obtained a large punitive damage award was denied attorneys fees.[101] Also, fees have been denied when the defendant�s violation of the Act was technical rather than willful or in bad faith.[102]

�4.10 Who and what it covers

The HRRA covers those contractors who fix, replace, alter, convert, modernize, improve, or make additions to any residential property.[106] The contractor can be an individual, partnership, corporation, business or other legal entity.[107] The HRRA covers work such as construction, installation, replacement or improvement of swimming pools, basements, chimneys, garages, fences, heating and cooling systems, furnaces and boilers, windows and roofs and the like.[108] It does not include work such as sale, installation, cleaning and repair of carpets, any work dealing with home appliances such as disposals, refrigerator, ranges, washing machines, hot water heaters and the like, if the person replacing, installing, repairing, or connecting the appliances is an employee or agent of the merchant who sold the item to the homeowner.[109] HRRA is silent whether it applies to contractors who repair such appliances, but are not an employee or agent of the merchant who sold the item to the homeowner.

In Central Illinois Electrical Services, LLC v. Slepian,[110] the homeowner hired an electrical contractor pursuant to an oral contract to complete the work of the previous contractor terminated from the job. There was evidence that the homeowner did not provide the contractor with architectural plans or specifications. There also was evidence that the homeowner made several payments to the contractor for its time and material. The contractor argued that HRRA should not apply, since it was not the original contractor but merely a completion contractor. The contractor also argued the scope of the work was undetermined and it agreed to work on a time and material basis. Therefore, it contended, it was impossible to prepare a written contract in compliance with HRRA that estimated the price with �reasonable particularity�. The court ruled first that HRRA contained no exception for completion contractors. Second, the court held that there is no exception for projects billed on a time and material basis.[111] Since the court found a violation of HRRA, the contract between the parties was nullified and the judgment in favor of plaintiff for a mechanics lien was reversed.[112] A prerequisite of a mechanics lien is an enforceable contract.[113]

In MD Electrical Contractors, Inc. v. Abrams,[114] the court found that HRRA only required compliance with the Act by the party contracting directly with the owner and not by the original contractor�s subcontractors.

Under the HRRA, a residence means a single-family home or dwelling or multi-family home containing 6 or fewer apartments, condominiums, townhouses, used or intended to be used by occupants as dwelling places.[115] The HRRA does not apply to new construction of single family homes nor any multi-family residences or repairs to units with more than 6 apartments or dwelling units.[116]

�4.12 Consumer Rights Brochure

For contracts over $1,000 value, the contractor must provide a consumer rights brochure to the homeowner prior to starting any repair or remodeling work.[121] The brochure is labeled as �Home Repair: Know Your Consumer Rights.�[122] and both the contractor and homeowner need to sign and date receipt of the brochure. The contents of the consumer rights brochure is listed specifically as:

HOME REPAIR: KNOW YOUR CONSUMER RIGHTS

As you plan for your home repair/improvement project, it is important to ask the right questions in order to protect your investment. The tips in this fact sheet should allow you to protect yourself and minimize the possibility that a misunderstanding may occur.

AVOIDING HOME REPAIR FRAUD

Please use extreme caution when confronted with the following warning signs of a potential scam:

(1) Door �to-door salespersons with no local connections who offer to do home repair work for substantially less than the market price.

(2) Solicitations for repair work from a company that lists only a telephone number or a post-office box number to contact, particularly if it is an out-of-state company.

(3) Contractors who fail to provide customer references when requested.

(4) Persons offering to inspect your home for free. Do not admit anyone into your home unless he or she can present authentic identification establishing his or her business status. When in doubt, do not hesitate to call the worker�s employer to verify his or her identity.

(5) Contractors demanding cash payment for a job or who ask you to make a check payable to a person other than the owner or company name.

(6) Offers from a contractor to drive you to the bank to withdraw funds to pay for the work

CONTRACTS

(1) Get all estimates in writing.

(2) Do not be induced into signing a contract by high-pressure sales tactics.

(3) Never sign a contract with blank spaces or one you do not fully understand. If you are taking out a loan to finance the work, do not sign the contract before your lender approves the loan.

(4) Remember, you have 3 business days from the time you sign your contract to cancel any contract if the sale is made at your home. The contractor cannot deprive you of this right by initiating work, selling your contract to a lender or any other tactic.

(5) If the contractor does business under a name other than the contractor�s real name, the business must either be incorporated or registered under the Assumed Business Name Act. Check with the Secretary of State to see if the business is incorporated or with the county clerk to see if the business has registered under the Assumed Business Name Act.

(6) Homeowners should check with local and county units of government to determine if permits or inspections are required.

(7) Determine whether the contractor will guarantee his or her work and products.

(8) Determine whether the contractor has the proper insurance.

(9) &

Illinois Construction Manual, Chapter 4, Selected Statutes, West Publishing, 2008

�4.2 Consumer Fraud and Deceptive Practices Act