Good Faith & Fair Dealing

Nova Contr., Inc. v. City of Olympia, No. 48644-0-II, 2017 Wash. App. LEXIS 913 (Ct. App. Apr. 18, 2017)

This case arose out of a public project in which the City of Olympia (“City”) hired Nova Contracting, Inc. (“Nova”) to replace a culvert. A prior City project on which Nova completed work ended with Nova receiving extra compensation due to the City’s design errors and, as a result, a grudge held by some City staff against Nova.  The present contract required Nova to send submittals describing its plans for bypass pumping and excavation to the City’s engineer for approval before it could begin work.  The City’s decision regarding submittals was final and Nova bore the risk and cost of delay due to any non-approval.
The City issued its Notice to Proceed on August 11, 2014, but Nova could not begin construction due to the City’s rejection of its submittals. Nearly one month later, the City declared Nova to be in default because it failed to provide satisfactory submittals and failed to mobilize to the site.  Coincidentally, that same day, Nova had mobilized to the site; the City, however, later ordered Nova to cease work because it had commenced operations before obtaining the requisite approval.  Nova protested the City’s declaration of default, but the City terminated the contract on September 24.

Nova filed suit against the City for breach of contract, claiming that its handling of the submittals imposed requirements that were not part of the project’s specifications, thereby delaying Nova’s performance to a point where the project could not be timely completed. In support thereof, Nova’s witnesses declared that the City had appeared to be reviewing the submittals with the goal of rejecting them as a sort of “gotcha” review employed to prevent Nova’s performance.  The City moved for summary judgment, and the trial court granted its motion.  Nova appealed, arguing that there existed genuine issues of fact as to why the project was not completed and that the City had breached its duty of good faith by preventing Nova from attaining its justified contractual expectations.  The City argued that the duty of good faith did not apply because it had unconditional authority to accept or reject Nova’s submittals.


Continue Reading Owners Beware: Washington Appellate Court Holds Playing ‘Gotcha’ With Project Submittal Review Could Breach the Duty of Good Faith and Fair Dealing

Metcalf Constr. Co. v. United States
742 F.3d 984 (Fed. Cir. 2014)

This action arose out of the design and construction of military housing units at a U.S. Navy facility in Hawaii.  Pre-bid documents for the project supplied by the government provided test information regarding soil conditions on the site.  The government also included a disclaimer that this information was “for preliminary information only” and the resulting contract required that the contractor conduct its own independent soil investigation.

Metcalf Construction Company (the “Contractor”) was awarded the contract.  When the Contractor conducted its independent soil investigation it discovered that the soil was not as represented.  The Contractor notified the government and discussions ensued.  In those discussions, the Contractor recommended a different design and construction approach to account for the newly uncovered conditions, while the government generally insisted on following construction requirements set out in the original contract.  After a year’s delay, the Contractor decided that the cost of waiting for the government to approve the design changes had become too high, and it began to implement those changes without a contract modification.  As a result, the Contractor spent approximately $26 million over the original contract amount to remedy the soil conditions and finish the project.


Continue Reading Federal Circuit Court Clarifies Standard for Establishing Government’s Breach of the Implied Duty of Good Faith and Fair Dealing in Addressing Claim for Differing Site Conditions