Most of us understand that Construction is just barely controlled chaos. It is such a human business, orchestrated by people of various backgrounds, education, training and levels of experience. There are so many people trying to coordinate so many facets of work! I think there has never been a construction project in history that was built exactly according to specification or exactly on schedule. As a general rule, ALL parties on the project are in breach of contract from day one until completion.
Many judges have a great deal of experience with construction cases. These cases have a reputation amongst the court as being extremely complicated and factually intensive. My favorite expression of this by a court is from the District of Columbia Court of Appeals. The three Judge Appeal Panel started their analysis of the case by stating:
We note parenthetically and at the outset that, except in the middle of a battlefield, nowhere must men coordinate the movement of other men and all materials in the midst of such chaos and with such limited certainty of present facts and future occurrences as in a huge construction project such as the building of this 100 million dollar hospital. Even the most painstaking planning frequently turns out to be mere conjecture and accommodation to changes must necessarily be of the rough, quick and ad hoc sort, analogous to ever-changing commands on the battlefield. Further, it is a difficult task for a court to be able to examine testimony and evidence in the quiet of a courtroom several years later concerning such confusion and then extract from them a determination of precisely when the disorder and constant readjustment, which is to be expected by any subcontractor on a job site, become so extreme, so debilitating and so unreasonable as to constitute a breach of contract between a contractor and a subcontractor. This was the formidable undertaking faced by the trial judge in the instant case and which we now review on the record made by the parties before him.
Blake Constr. Co. v. C. J. Coakley Co., 431 A.2d 569,575 (D.C. 1981).
This opinion is also helpful to determine the proper calculation and award of damages in a complicated construction case.
The trial court determined that the General Contractor did not provide a reasonably clear and convenient work area to the Subcontractor, thus impeding the Subcontractor's work and increasing the Subcontractor's cost of performance; that the General Contractor failed to sequence reasonably the work so as to permit the Subcontractor to perform under the subcontract; and that the General Contractor had inadequate supervision of its other subcontractors.
Since the General Contractor never supplied the Subcontractor with a performance schedule as contemplated by the subcontract, the trial judge found the Subcontractor was under no obligation to submit a written request for an extension of time to complete its work.
The Court considered the implicit duties between contracting parties, particularly the duty not to prevent performance by the other party. Courts have construed those mutual duties in light of the prevailing practices of the trade and inherent uncertainties of the timing and conditions of actual performance.
The General Contractor did hinder or prevent the Subcontractor's performance; scheduled the on-site work in an unreasonable sequence; did not provide a job site in suitable condition for the Subcontractor to perform its work; and did not cooperate with the Subcontractor when necessary to assure the Subcontractor's performance.
In an interesting finding, the Court held that when the General Contractor failed to assure the Subcontractor that it would be compensated for the additional expenses it had incurred, the General Contractor breached the implicit terms of the subcontract. The Subcontractor acted properly in discontinuing performance under the subcontract. The Subcontractor did not breach the subcontract by ceasing work and withdrawing from the site.
However, the General Contractor's conduct did not amount to tortious fraud, duress or interference. Fraud must be established by clear and convincing evidence. In order to prevail on a claim of fraud, a plaintiff must establish: (1) a false representation (2) in reference to a material fact (3) made with the knowledge of its falsity (4) with the intent to deceive and (5) on which action is taken in reliance upon the representation. Accordingly, the Subcontractor was denied punitive damages. Punitive damages are awarded for breach of contract only where there is an intent to defraud or circumstances of extreme aggravation.
The Court then considered whether the Subcontractor could recover the alleged expenses incurred by the Subcontractor regularly over the period of its performance of the subcontract but which it did not bill to the General Contractor until after discontinuing work under the subcontract. The General Contractor had not been informed of their amount with sufficient specificity at the time they were incurred.
This was an unusual situation where the General Contractor breached its subcontract but the cost of performance by the Subcontractor exceeded the value of the subcontract. A court will not salvage a contracting party from the consequences of a losing contract, but in this case the Court felt it was clear that the change orders and the mode of performance by the General Contractor significantly amended the subcontract.
The measure of damages was properly calculated by taking the cost of partial performance incurred by the Subcontractor, which was $ 598,666.75, and subtracting therefrom the payment received to date by the Subcontractor from the General Contractor, which totaled $ 242,100.00. The difference between these two figures is $ 356,566.75, and constitutes the damages for which the General Contractor was liable to the Subcontractor.
The General Contractor also vigorously urged the applicability of the "no damage for delay" clause of the subcontract. However, such a clause did not give the General Contractor a license to cause delays willfully by unreasoning action, without due consideration, and in disregard of the rights of the other parties, nor did the provision grant the General Contractor immunity from damages if delays were caused by it under such circumstances.
Courts will generally enforce such a "no damage for delay" clause unless the delay is one "(1) not contemplated by the parties under the [no damage for delay] provision, (2) amounting to an abandonment of the contract, (3) caused by bad faith, or (4) amounting to active interference." The delays here were not contemplated by the parties to the subcontract and resulted from conduct amounting to active interference, largely due to the General Contractor's improper work sequencing. A win for the Subcontractor!