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Subcontract Provisions Sink GC’s Delay Claim

Bast Hatfield, Inc. v. Joseph R. Wunderlich, Inc.
2010 WL 4342196 (3rd Dep’t, Nov 4, 2010)

This appeal involved a dispute between Bast Hatfield (the GC) and Wunderlich (the sitework subcontractor) that arose out of a delay to a project to build a new Lowe’s Home Improvement Center.

Supreme Court’s holding was affirmed that Bast had wrongfully partially terminated Wunderlich, and that Wunderlich and its sub-sub were entitled to damages to be collected from the Bast’s lien discharge bond.

While much of the decision is fact-specific, the following general contract principles were ruled against the GC:

The court held that Bast, as GC, was properly held accountable to Wunderlich to the extent that Wunderlich’s performance was impeded by the owner. “By entering into a contract that required Wunderlich to comply with a schedule dependent upon [the owner’s] demolition, Bast made an implied promise to Wunderlich that the demolition would be complete in time for Wunderlich to perform under the sibcontract. We reject Bast’s argument that Wunderlich assumed the risk of delay.”

Apparently the subcontract did not contain a no-damage-for-delay provision.

In reference to the usual site inspection provision in construction contracts the court said: “Wunderlich’s contractual acknowledgement that it had inspected the site and assumed responsibility for the completion of the work under the existing conditions cannot be construed to include conditions outside its control that did not come into existence until after the subcontract was executed.”

Also, under the facts of this case, Bast was held to have waived the requirement that Wunderlich give the usual 21-day notice of a delay claim.

Lastly, “By partially terminating Wunderlich without additional notice that its work continued to be inadequate – or indeed, any other communication indicating that Wunderlich’s performance was unsatisfactory – Bast’s partial termination of Wunderlich breached the subcontract. Thus, Supreme Court properly concluded that Bast’s partial termination was wrongful and, accordingly, that Bast was not entitled to damages for the expenses it incurred in completing the site work.”

The point here is – do what the contract says, because the courts are going to enforce the contract as written. If a cure notice(s) is required prior to defaulting a party to a contract, make sure you give those notices. If you don’t, you will be held in breach of contract, and may have blown what otherwise would have been a good claim.

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