Better Roads Digital Magazine
Issue link: https://read.dmtmag.com/i/94328
During the project, sand infiltration was discovered in Brown University's heating plant, which could have caused serious damage to its boilers. As a result, Brown shut down its heat- ing plant and obtained a temporary heating sys- tem for the 2006 - 2007 heating period. Because of uncertainty regarding potential damage to the heating plant from the sand infiltration and which party or parties were responsible, Bond established a damage contingency fund and diverted payments to the fund that were otherwise owed to various subcontractors. On or about October 30, 2006, it was discovered that insulation surrounding a 14-inch pipe had been flooded. As a result, the insulation deterio- rated and required that some of the pipe be removed and replaced at a significant cost to DiGregorio and Process. The parties disagreed re- garding who was to blame for the wet pipe. DiGregorio alleged that Process caused the insulation to become wet while pressure testing the pipe. Process denied responsi- bility and claimed that DiGregorio failed to keep the trenches dry, as required under the contract, which caused the pipe insulation to be- come wet. Nonetheless, Process replaced the damaged pipe and finished its work on the project. In 2008, Process filed suit against DiGregorio for breach of contract. Process claimed that DiGregorio owed it $428,580.38 for change orders and extra work. The court held a two-day bench trial without a jury. The court examined the DiGregorio/Process con- tract and found it incorporated the standard form AIA A-201 changes clause, which provides that "a Change Order is a written instrument prepared by the Architect and signed by the Owner, Contractor and Architect stating their agreement . . ." In addi- tion, the contract provided that "the Subcontractor agrees that all work shall be done subject to the final approval of the Architect," and that "receipt of a fi- nal payment by DiGregorio from Bond Bros. for the Subcontractor's line item(s) is an express and strict condition precedent to DiGregorio's obligation to make final payment to the Subcontractor." The court found that Process failed to present any evidence that the change orders for which it sought payment were in writing and signed by the parties. In addition, Process failed to present any evidence regarding the architect's approval of its extra work. Moreover, Process failed to present any evidence that DiGregorio ever received payment from Bond for its extra work. As a result, Process' claim for breach of contract failed because Process could not estab- lish that it adhered to the contract requirements for written change orders and other prerequisites to payment. This case shows the importance of knowing and It is important that contracting parties know and understand their contract provi- sions, as the contract provides a roadmap to which the court will refer if, and when, a dispute later develops. adhering to contract requirements, especially re- garding changes and extra work. Contracts often contain detailed requirements for the approval of changes, extra work and payment. It is important that contracting parties know and understand their contract provisions, as the contract provides a roadmap to which the court will refer if, and when, a dispute later develops. Although there are legal defenses to contract requirements regarding written change orders, they are not always applicable. Here, Process appeared to lack an understanding of its contract requirements regarding written change orders. This lack of understanding and failure to adhere to the contract requirements was fatal to its claim. If Process had known and complied with the terms of its contract, it could have taken steps to have properly documented its extra work, presented the required evidence at trial and prevailed on its claim. Brian Morrow is a partner in Newmeyer & Dillion LLP, a law firm in California. He is a licensed California Civil Engineer, and specializes in construction law, including road and heavy con- struction. Contact him at brian.morrow@ndlf.com Better Roads November 2012 9b