Chicago Business Litigation Lawyer Blog
A consulting company agreed to perform cost-reduction work for a hospital. The agreement it had with the hospital specified that the hospital could hire the consultancy to perform additional work outside of the scope of the agreement. The hospital did so, hiring the consultancy to prepare an RFP document and negotiate with a potential equipment supplier. After the process was completed, the hospital refused to pay the consultancy for the additional work. The consultancy sued, and the trial court determined that a contract implied in fact existed between the two companies and the hospital was required to pay for the additional work. The appellate panel determined that the trial court had not erred, and it affirmed the decision.
In 2014, Northwest Community Hospital hired ESP Global, an equipment maintenance consultancy company, to assist Northwest in reducing its equipment expenses. Peter Vincer, the president and owner of ESP testified that his company typically assists clients using a two-step approach: first ESP conducts an initial assessment of the client’s equipment service expenditures, and then it recommends cost-reduction strategies accordingly. During the second step, ESP assists the client in implementing the prior recommendation. ESP charges a flat fee for the first step and a contingency for the second step, which is calculated based on the client’s actual savings.
The two parties entered into a contract in June 2014. ESP completed the initial assessment required by the contract in early July 2014, and Northwest paid ESP $10,000. After this, Northwest expressed interest in obtaining additional services from ESP. Specifically, the hospital wanted assistance with a request for proposal that it intended to send to equipment suppliers. The two companies communicated over emailed and agreed to prepare an RFP draft, in exchange for 10% of Northwest’s savings from the RFP over a five-year period. Vincer later sent the RFP draft to Jac Higgins, the interim executive director of Northwest’s supply chain. After Northwest approved the RFP, ESP distributed it to the prospective vendors. Higgins’ employment with Northwest was later terminated.
Northwest selected Sodexo as the winning bidder for its contract. ESP negotiated a contract with Sodexo on behalf of Northwest. The Sodexo contract was finalized in September 2014. When ESP then attempted to collect its fee from Northwest, Northwest refused to pay, claiming that the work was within the scope of its original agreement. ESP then sued Northwest for the additional work it performed pursuant to an implied contract between the parties. ESP sought damages in the amount of $275,001.95, which represented 10% of Northwest’s actual savings as a result of the Sodexo contract over a five-year period.
After a bench trial, the trial court held that the parties’ actions created a contract implied in fact for the additional services. The trial court determined that the parties’ written contract was clear and unambiguous and that Northwest’s parole evidence was inadmissible to determine the scope of the work required under the contract. The trial court entered judgment in favor of ESP for $194,159.43, and Northwest appealed.
The Illinois Appellate Court panel began by stating that the original agreement between ESP and Northwest did not call for the production of an RFP, but did specify that Northwest may choose to hire ESP to provide services outside the scope of the agreement, including drafting a procurement document such as an RFP. The panel stated that, based on the plain language of the contract, it could not say that the parties intended to include an RFP as part of the contract. The panel found that the trial court therefore correctly determined that ESP was not required to complete an RFP as part of the original agreement.
Next, the panel determined that the trial court’s determination that a contract implied in fact existed between ESP and Northwest for the RFP work was not against the manifest weight of the evidence. The panel stated that in light of the evidence in the record, it found that the circumstances and actions of the parties demonstrated a mutual intent to contract. The panel then affirmed the trial court’s judgment in favor of ESP, but remanded the case for a hearing to determine whether ESP was entitled to additional damages from Northwest.
You can read the Court’s opinion here.
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