Busy, busy, busy! I have reviewed five new construction contracts in the past two weeks. If you are a contractor, there are a number of key provisions that you will want to be on the “look out” before you sign the agreement. Check out my series on the Top 20 Contract Issues for Contractors and Subcontractors.
Recently I have worked on a couple of matters for contractors who were expecting unlimited access to their construction site, only to find the owner had given the prime access point to an adjacent contractor. The owners defended their actions based on standard contract specifications requiring “coordination and cooperation” of the contractors.
What have the courts done in these situations? They look both at the contract language and at implied duties. It is settled law that every contract contains an implied obligation that neither party will do anything to prevent, hinder or delay performance. An owner, including a DOT, is said to have violated the implied obligations where its action or inaction delays performance of the project, thus increasing costs. Here are two few cases addressing the situation:
- In Gerhardt F. Meyne v. U.S., 110 Ct.Cl. 527 (1948), the Court of Claims considered a specification which provided that site “entrance for trucks shall be at South gate of reservation, over Walker Avenue, Highwood, Illinois, via Patten Road to site.” The contract plainly contemplated the use of Patten Road and other paved roads. Shortly before the contractor began performance, military authorities closed the road and directed the contractor to enter the reservation over an unpaved road. The court found the site access specification was a representation that Patten Road would be available and that the contractor relied on this representation. If the roads were not available, the government impliedly promised it “would stand the increased costs.” On that basis the court found the contractor was entitled to recover its increased costs stemming from the use of a different site entry.
- Re Commercial Contractors Equipment, Inc., 2003 WL 22232953 (A.S.B.C.A.) involved a contractor who could not access the construction site due to the government’s inability to secure property rights by the promised time. The subsequent delay affected construction sequencing and scheduling. Although the contractor was able to work on another phase after altering its construction sequencing, it spent additional time and effort moving its forces and equipment around the unsecured location. The contractor initially agreed to avoid the encumbered area; however, the Board found the contractor did not waive its right to seek additional compensation for the denied access. Additionally, the contractor informed the corps it could no longer avoid such work without incurring additional costs. The Board found the Army Corps’ failure to secure unencumbered access to the construction site was a breach of its express warranty and constituted a change to the contract, entitling the contractor to an equitable adjustment for additional costs incurred from the disruption of its work sequence and movement of its equipment and work forces.
Keep it positive. What about clauses like the “coordination and cooperation” of contractors clause? If there is a specific representation in the contract regarding access, then those clauses should not prevent recovery. In an old Supreme Court case, Hollerbach v. United States, 233 U.S. 165, 34 S.Ct. 553 (1914), the court made it clear that a government contractor is entitled to rely upon positive statements made in the specifications despite general cautionary language in other paragraphs of the specifications. The court held that the positive statement in the specifications constituted a representation upon which the contractor had a right to rely. But in order for the government to be held liable for its statements they must be interpreted as an express warranty.