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Thursday, August 21, 2014

Water Contract Void Because it Exceeded 40 Year Term

In 2004, the Village of Chandlerville entered into a contract with a rural water district (CWRD) for CWRD to supply water to Chandlerville that it would purchase from the City of Virginia.  4 years later, while Virginia was constructing a new water-treatment facility needed to supply Chandlerville with water, Chandlerville informed CWRD that it no longer intended to purchase water through CWRD.  Virginia sued, claiming that Chandlerville breached its water contract.  The trial court dismissed the case, finding among other things, that the contract was void ab initio (at the outset)because it exceeded the 40 year statutory term. 

In an unpublished opinion, the appellate court agreed with the trial court that the contract was void for exceeding a 40 year term.  City of Virginia v. Village of Chandlerville, 2014 IL App (4th 130851-U).  Although the contract provided for a 40 year water-delivery provision, that provision would not commence until after Virginia finished its construction project, which was expected to take at least 5 years.  The Illinois Municipal Code states that a contract for a water supply is “not to exceed 40” years.  65 ILCS 5/11-124-1(a).  Because the contract would exceed the 40 year term by at least 5 years (counting both the construction phase and the water-delivery phase), it was void because Chandlerville lacked the authority to enter into the contract.

Municipalities should be careful in drafting contract terms to avoid violating any statutory contract terms.  Even if the stated term of the contract is within the statutory limitations, if the contract could exceed the term because of any pre-requisites (like the construction phase in the Chandlerville contract), it could be void and unenforceable.   

Post Authored by Julie Tappendorf, Ancel Glink


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