payment dispute

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McKinney & Moore, Inc. v. City of Longview, Texas
2009 Tex. App. LEXIS 9299 (Tex. App., Dec. 8, 2009)

The Court of Appeals of Texas for the Fourteenth District held that a general contractor’s acceptance of final payment barred its claims for compensation for extras. The Court relied on the express release language in the parties’ contract to support its ruling.

The City of Longview, Texas (the “Owner”) retained McKinney & Moore, Inc. (“MMI”) to serve as a general contractor for the construction of the Lake O’ the Pines Raw Water Intake Structure (the “Project”). The parties’ contract contained various provisions related to subsurface conditions and the Owner supplied reports regarding such conditions. Among other things, the contract also provided that the Owner was responsible for design accuracy and sufficiency of the contract documents. The contract further addressed circumstances under which MMI would be entitled to reimbursement for damages and the effect of MMI’s acceptance of final payment.

Kiski Area Sch. Dist. v. Mid-State Surety Corp.
2008 Pa. LEXIS 2260 (Dec. 17, 1988)

Kiski Area School District (“the District”) entered into an agreement with contractor, Lanmark, for the construction and renovation of an elementary school. Mid-State Surety Corporation (“Midstate”) provided a performance bond for the project naming Lanmark as principal and the District as obligee.

The District became dissatisfied with the quality and timeliness of Lanmark’s work, declared it in default, withheld final payment and demanded that Mid-State assume responsibility for the remaining work. The District did not remit the remaining contract balance to Mid-State. Lanmark filed suit against the District seeking payment of the contract balance (the “Lanmark Matter”). The District counterclaimed and joined Mid-State. The District also filed a separate action against Lanmark and Mid-State (“the District Matter”), which was stayed pending resolution of the Lanmark Matter.

Bryan’s Quality Plus, LLC v. Shaffer Builders, Inc.
2008 U.S. Dist. LEXIS 61713 (E.D. Pa. Aug. 12, 2008)
The District Court for the Eastern District of Pennsylvania was faced with a motion to dismiss a defendant’s counterclaims for fraud and negligent misrepresentation. The case arose out of a subcontract between the defendant contractor and the plaintiff subcontractor in which the subcontractor agreed to complete piling work for a commercial project undertaken by defendant (the “Project”). The contractor alleged in its counterclaim that the subcontractor represented that it would complete the work in seven days, that it could install in excess of fifty piles a day, that its performance and equipment would surpass conventional methods, that it would furnish and install pile tension brackets and fasteners, and that it had sufficient credit to purchase the materials necessary to complete the work. The parties executed a written contract, although some of the work was completed prior to execution of the subcontract.

RLI Insurance Company v. Indian River School District
2008 U.S. Dist. LEXIS 43303 (D. Del. June 3, 2008)
In this case, the United States District Court for the District of Delaware held that a surety’s claim against an architect and construction manager for improper approval of payments to the principal was barred by the economic loss doctrine. Additionally, the court held that the surety was not released of its liability to the owner where the owner wrongfully paid the contractor, as the owner had made those payments in reliance on certifications from the architect and the construction manager.

Acme Contracting, Ltd. v. TolTest, Inc
2008 U.S. Dist. LEXIS 36355 (E.D. Mich. May 5, 2008)
The United States District Court for the Eastern District of Michigan recently had to interpret an Ohio statute (O.R.C. §4113.62) which statute dealt with the enforceability of no damages for delay provisions in construction contracts. Relying on prior cases interpreting the applicable statute, the District Court found that the subcontract which limited delay claims to a time extension only was prohibited under the statute and, therefore, void and unenforceable. Although the District Court permitted the subcontractor to recover delay damages, it also concluded that the subcontractor had not proven that it was entitled to extended home office overhead costs using the Eichleay formula and refused to award such damages.

Trocon Construction Corp. v. City of New York
2008 N.Y. App. Div. LEXIS 4316 (May 20, 2008)
The Appellate Division of the Supreme Court of New York held that an early completion bonus in a construction contract was not barred by a “no damages for delay” clause as it was a bid item of the contract.
The case arose out of a contract between a contractor and the City of New York for the reconstruction of part of Sixth Avenue in Manhattan. The contractor agreed to perform soil borings to locate and determine the size of underground voids believed to be contributing to sidewalk and pavement subsidence and to appropriately remedy the voids. Because the City of New York contemplated that the work on the project would interfere with vehicular and pedestrian traffic, the contract provided for various payment incentives for early completion, including an early completion bonus if work on both sides of the avenue was completed within 30 days. Delays arose principally due to a dispute over the boring operations when unexpected boulders were encountered. The contractor contended that it was not required by the contract specifications to perform borings through boulders, which should be completed using a different boring operation; the City maintained that such borings were included and should be performed using the same operation as provided for in the contract. The dispute was resolved by the Contract Dispute Resolution Board, which found that the contractor was entitled to compensation for the extra work performed. The Board claimed lack of jurisdiction to resolve the contractor’s claim for the incentive bonus for early completion of the work on the west side of the avenue.

Donald M. Durkin Contracting, Inc. v. City of Newark
2008 U.S. App. LEXIS 28987 (D. Del. Apr. 9, 2008)
The Delaware District Court held that a contractor who is improperly terminated is entitled to recover its expectation interest or the unpaid contract price less the amount it would have cost the contractor to complete the job. Other damages which are causally connected to the owner’s breach are recoverable as well, but costs of pre-termination performance or post-termination losses which are not causally connected are not recoverable. Further, the Court affirmed that Delaware follows the “American Rule’ which precludes recovery for attorneys fees incurred in consequence of the owner’s breach.

Perdue Farms, Inc. v. Design Build Contracting Corp.
2008 U.S. App. LEXIS 2861 (4th Cir. Feb. 8, 2008)
The Fourth Circuit held that where a condition precedent to arbitration, in this case voluntary mediation, was not fulfilled, a party to a contract had no right to force arbitration of the…

Liberty Mutual Insurance Company v. N. Picco & Sons Contracting Co., Inc.
2008 U.S. Dist. LEXIS 4915 (S.D.N.Y. Jan. 16, 2008)
The United States District Court for the Southern District of New York (“SDNY”) recently had to decide whether a surety was entitled to assert subrogation rights against other project participants when the surety completed the construction work abandoned by the general contractor and performed remediation work. The SDNY determined that the surety did not voluntarily undertake the remediation work and, therefore, was entitled to assert subrogation rights.

Central Ceilings, Inc. v. Nat’l Amusements, Inc.,
70 Mass. App. Ct. 172, 873 N.E.3d 754 (Sept. 18, 2007)
National Amusements, Inc., entered into a contract with Old Colony Construction Corporation for the construction of National’s cinema theater complex. Old Colony subsequently entered into a subcontract with the plaintiff, Central Ceilings, Inc., for a portion of the construction of the Project. Although delays made meeting the original completion date next to impossible, National stressed to Central its strong desire to have the theatre complex open for the Labor Day weekend. In response, Central made it clear to National that meeting such an aggressive completion date would require it to accelerate the work schedule. In addition, since Old Colony was experiencing cash flow problems and owed Central a substantial sum of money for work already completed, Central demanded assurances from National that it would be paid for its work before it would continue with the accelerated work on the Project. As a result, one of National’s agents orally agreed to pay Old Colony’s obligations to Central. Thereafter, Central completed its work and achieved substantial completion by August 25.