What’s a goocher? If you saw the movie, Stand By Me, then you know exactly what I mean. And there are times when parties to a construction contract face a goocher. Here’s what I mean…
In J. Clancy, Inc. v. Khan Comfort, LLC, the Supreme Court of South Dakota held that a missing time element in a construction contract did not invalidate the contract. In other words, the court found that a contract existed—i.e., there was meeting of the minds among the parties—despite the lack of a completion date or time of performance.
In this payment dispute between the owner of a hotel and a construction contractor, there did not appear to be a traditional construction contract executed by the parties. However, there were numerous written documents such as a proposal, invoices, and change orders that had been either signed by or transmitted between the parties. Based upon those documents, the trial court held that there was not an express written contract, but that there was a series of implied-in-fact contracts between the parties.
The appellate court disagreed and held that the contractor’s proposal, which was signed by the owner, was an unqualified acceptance of the parties’ agreement. The owner’s subsequent payment of the initial deposit and the contractor’s immediate commencement of work evidenced the formation of a contract.
Here’s the goocher! The appellate court held that all essential terms of an express contract were present in the contractor’s proposal, despite the fact that there was not a time of performance.
The document listed the subject matter of the work to be performed, the quantity of materials to be ordered and installed, the price for the goods, and the parties’ payment terms. Missing from the September document was a timeline for completion of the work. This, however, is not fatal.
Relying on a South Dakota statute, the court concluded: ““If no time is specified for the performance of an act, a reasonable time is allowed.”
Whether you are dealing with a commercial or residential project and whether you are a contractor or owner, this case illustrates a few important concepts. First, words matter. What you include in your contract will be important for avoiding a dispute, as well as determining the outcome after a dispute arises. Second, time matters. While the court in this case found that the missing element of time was not fatal, in many states the words “Time is of the essence” in the construction contract is a material term that needs to be included if you want to enforce that time period. Finally, conduct matters. Both the trial court and appellate court found that the conduct of the parties were important, although the courts reached different conclusions. Avoid these type of disputes by having a roadmap of risk allocation through a clear and unambiguous construction contract.