KIRSCHENBAUM & KIRSCHENBAUM, P.C. ATTORNEYS AT LAW
200 Garden City Plaza
Garden City,  New York 11530
516-747-6700

Enforcing "Illegal" Contracts

The fire alarm contract between the parties dated July 27, 2000 is enforceable
as the entire contract was not for illegal conduct and the code violation was
merely malum prohibitum not malum in se.  The general rule that an illegal
contract is not enforceable does not pertain where the underlying contractual
conduct was not malum in se, or evil in itself.  Rather, "if a statute or
regulation ‘does not provide expressly that its violation will deprive the
parties of their right to sue on the contract, and the denial of relief is
wholly out of proportion to the requirements of public policy or appropriate
individual punishment, the right to recover will not be denied.'" Joe O'Brien
Investigations, Inc. v. Zorn, 694 N.Y.S.2d 216 (3rd Dept. 1999), citing Lloyd
Capital Corp. v. Pat Henchar, Inc., 80 N.Y.2d 124, 589 N.Y.S.2d 396, 603 N.E.2d
246 (1992).

In Zorn, the defendant hired a private investigator to find her husband.
Pursuant to regulation, the investigator provided defendant with a written
statement of the services to be rendered with an estimate of the cost.  The
defendant verbally authorized the investigator to do additional work beyond the
scope of the written agreement.  The verbal modifications were not reduced to
writing as required by the statute.  Defendant then refused to pay for the
additional work claiming the oral agreements were unenforceable since they
violated 19 NYCRR 173.1(a).  The court held that the oral agreements did
violate the regulation, but they were merely malum prohibitum and therefore
enforceable since defendant authorized and accepted the plaintiff's services.
Nassau County Fire Prevention Ordinance No. 56-1962, Article XVII, Section
17.2(B) requires that the owners or lessees of property located in Nassau
County obtain a permit in order to operate a fire alarm system on the
premises.   Although the owner or lessee is required to obtain the permit, the
alarm company that will install the equipment files the application with the
requisite fee.  The permit for the system is transferable to a new owner or
tenant upon written notification to the Nassau County Fire Marshal and payment
of an additional fee.  Section 17.8 specifies the penalties for violating any
part of the ordinance, including Section 17.2(B).  Violations are punishable by
a fine or imprisonment of not more than one year.  The penalties section does
not specify that any contracts that violate the ordinance are not enforceable.
Article XVIII of the Ordinance sets forth the parameters for fire detection
systems in buildings.  Section 18-5-3.2 requires that the alarm installer
submit plans and specifications for approval by the fire marshal prior to
installing the system.  Claimant was cited by the fire marshal for violating
this section only.  The penalties for a violation of Article XVIII are
specified in Section 18-7-2.1 and  are identical to the penalties specified in
Article XVII.  Again, the article does not bar enforcement of a contract
containing a provision that violates the ordinance.

Courts generally dislike fee forfeitures especially in cases where the
defendant is raising the alleged illegality as a "sword for personal gain
rather than a shield for the public good." Lloyd Capital Corp., 589 N.Y.S.2d at
398.  Such is precisely the situation here.  Respondent specifically contracted
for a non-approved fire alarm system even though they were on notice that the
fire alarm system was required to be approved by the Fire Marshal.  Only after
respondent breached the agreement and claimant brought suit did respondent
raise the issue of the legality of the contract.  If, as respondent contends,
no fire alarm system was required in the building, then any approval by the
fire marshal prior to installation is clearly a revenue enhancing measure
rather then a public safety issue. As such, the respondent's only reason for
raising the violation that was contemplated and agreed to, is to excuse their
breach of the contract.  Where the regulatory penalties imposed by the
ordinance are sufficient to remedy violations of the ordinance, the contract
should be enforced.  Lloyd Capital Corp., 589 N.Y.S.2d at 398.
The fire alarm contract is not illegal and therefore should be enforced.
Unlike cases where the contractor was not licensed to perform the services
contracted for, claimant is licensed by the state to install, service and
maintain fire alarms.  The installed equipment was tested and in working
order.  Claimant ultimately submitted to the Nassau County Fire Marshal an
application and plans for the fire alarm system at respondent's premises as
required.  Furthermore, claimant would have modified respondents fire alarm
system as required by the fire marshal but the respondents chose instead to
breach paragraph 19 of the contract by refusing to pay claimant for the
materials required by the fire marshal.


 

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Kirschenbaum & Kirschenbaum, P.C.
Attorney(s) for Plaintiff
200 Garden City Plaza
Garden City, N.Y. 11530

www.kirschenbaumesq.com