New York Law Review

Tag: Construction Contract Law

  • Savin Brothers, Inc. v. State, 48 N.Y.2d 754 (1979): Contract Liability When Estimates are Not Guaranteed

    Savin Brothers, Inc. v. State, 48 N.Y.2d 754 (1979)

    A contractor cannot recover damages from the state for additional costs incurred due to inaccurate estimates in contract documents when the contract explicitly disclaims any warranty or representation of actual field conditions or quantities.

    Summary

    Savin Brothers, Inc. sued the State of New York for breach of contract, alleging that the state’s failure to include certain borrow requirements in the earthwork summary provided for bid preparation led to increased costs. The Court of Appeals reversed the Appellate Division’s partial allowance of the claim, holding that the contract documents expressly stated that the earthwork summary was not a warranty of actual conditions and that additional borrow, if required, would be paid at the standard unclassified excavation rate. The court emphasized that the contractor was not entitled to rely solely on the earthwork summary and was compensated according to the contract terms.

    Facts

    Savin Brothers, Inc. contracted with the State of New York for the reconstruction of a 2.3-mile section of road in Niagara County.
    The State provided an earthwork summary for bid preparation, which allegedly omitted certain borrow requirements.
    Claimants asserted that the State’s failure to include these borrow requirements led to increased costs in the borrow operation.
    The contract documents contained a disclaimer stating that the conditions and quantities in the earthwork summary were not warranted or represented as actual field conditions, and that borrow may be necessary even when not indicated.

    Procedural History

    The Court of Claims dismissed all causes of action asserted by Savin Brothers, Inc.
    The Appellate Division agreed with the Court of Claims except for the cause of action pertaining to the claimants’ “borrow” operation, for which it granted relief to the claimant.
    The State appealed to the Court of Appeals regarding the borrow operation claim.

    Issue(s)

    Whether the State of New York incurred liability for breach of contract by failing to include certain borrow requirements in the earthwork summary provided to Savin Brothers, Inc. for bid preparation, despite a disclaimer stating that the summary was not a warranty of actual field conditions or quantities.

    Holding

    No, because the contract documents explicitly stated that the earthwork summary was not a warranty or representation of actual field conditions or quantities, and the claimants were only entitled to be paid for additional borrow at the unclassified excavation rate, which they were.

    Court’s Reasoning

    The Court of Appeals based its decision on the specific language of the earthwork summary and related contract documents. The court highlighted the disclaimer, which stated: “Conditions and quantities as shown on the table * * * are not to be deemed or considered by the contractor as a warranty or a representation * * * of actual field conditions or quantities. Borrow may be necessary even when not shown on the excavation table. Borrow, if required, shall be paid for under the regular item of unclassified excavation, unless specifically provided for in the contract.”

    This language, according to the court, made it clear that the claimants were not entitled to rely solely on the earthwork summary. The court emphasized that the claimants were compensated for the additional borrow at the unclassified excavation rate, as stipulated in the contract. The court found no basis to deviate from the express terms of the agreement between the parties. By agreeing to the terms of the contract, the contractor assumed the risk of discrepancies between the estimated and actual borrow requirements.

  • Tully & Di Napoli, Inc. v. State, 43 N.Y.2d 731 (1977): Enforceability of No-Damages-for-Delay Clauses in Construction Contracts

    Tully & Di Napoli, Inc. v. State, 43 N.Y.2d 731 (1977)

    A “no-damages-for-delay” clause in a construction contract is generally enforceable, barring recovery of delay damages unless the delay was caused by the state’s gross negligence, deliberate misconduct, or breach of a fundamental obligation under the contract.

    Summary

    Tully & Di Napoli, Inc. contracted with New York State for highway reconstruction near the 1964 World’s Fair site. The project faced delays, and the contractor claimed damages exceeding seven million dollars, alleging the State contributed to the delays by forcing out-of-sequence work and improperly interfering with the schedule. The Court of Claims initially awarded the contractor significant damages, but the Appellate Division substantially reduced the award, finding the State not guilty of breach of contract. The Court of Appeals affirmed the Appellate Division’s decision, siding with their factual findings and implicitly upholding the enforceability of provisions allocating the risk of delay in complex construction projects.

    Facts

    Tully & Di Napoli contracted with the State to reconstruct highways in Queens County, including overpasses for the 1964 World’s Fair. The contract acknowledged potential delays and interferences. The contractor fell behind schedule, prompting the State to urge acceleration and increased workforce. The State advised contractors, including Tully & Di Napoli, that the work had to be completed by the World’s Fair opening in 1964 and that no extensions would be granted. The project was substantially completed by December 31, 1963, and fully accepted by the State on October 29, 1964, after four extensions totaling over 10 months.

    Procedural History

    The contractor filed a claim in the Court of Claims for over seven million dollars, alleging breach of contract. The Court of Claims found the State primarily responsible for the delays and awarded the contractor $2,888,026.60 in damages. The Appellate Division modified the judgment, reducing the award to $59,043.59, finding that the State did not cause undue delays and that some delays were attributable to the contractor’s own ineptness or were inherent in the project. The Court of Appeals affirmed the Appellate Division’s order.

    Issue(s)

    Whether the State breached its contract with the contractor by causing inordinate delays and improperly interfering with the contractor’s work, thus entitling the contractor to damages.

    Holding

    No, because the Appellate Division’s findings that the State did not cause undue delays and that some delays were attributable to the contractor’s own ineptness or were inherent in the complex project were factually supported.

    Court’s Reasoning

    The Court of Appeals deferred to the Appellate Division’s factual findings, which contradicted the Court of Claims’ conclusion that the State breached the contract. The Appellate Division found that some delays were due to the contractor’s inexperience or were inherent in the complex project. By affirming the Appellate Division, the Court of Appeals implicitly upheld the principle that parties can allocate the risk of delays in construction contracts, and that the State was not liable for delays not directly caused by its actions or inaction. The court noted that the dispute was essentially factual and the courts had resolved the issues differently, but the Court of Appeals sided with the findings of the Appellate Division based on the evidence presented. The decision reinforces the idea that in complex construction projects, contractors must bear the risk of certain types of delays, especially when the contract anticipates such potential issues. The case doesn’t explicitly discuss a “no-damages-for-delay” clause, but the outcome suggests its implicit presence and enforceability unless the delays are caused by the State’s gross negligence or willful misconduct. The court essentially found that the delays were within the scope of what the contractor should have anticipated when entering the contract. The absence of any dissenting or concurring opinions suggests unanimous agreement on the factual determination and the legal principles applied.

  • Yonkers Contracting Co. v. State, 24 N.Y.2d 167 (1969): State’s Waiver of ‘No-Interest’ Provision in Construction Contract

    Yonkers Contracting Co. v. State, 24 N.Y.2d 167 (1969)

    When the State reserves the question of interest on a severed claim until the determination of additional claims and the claimant successfully recovers judgment on those additional claims, the State waives the contract’s ‘no-interest’ provision on the severed claim.

    Summary

    Yonkers Contracting Co. sued the State of New York for breach of contract related to the construction of a bridge. The claim included a cause of action for the unpaid contract balance and three additional claims. The State initially refused to pay interest on the contract balance, citing a contract provision that acceptance of final payment waived any interest claim. However, the parties agreed to sever the cause of action for the contract balance and reserve the question of interest. The Court of Appeals held that because the State reserved the interest question and the claimant prevailed on one of its additional claims, the State waived the ‘no-interest’ provision. The court also addressed and rejected the claimant’s other claims regarding fabrication costs and alleged extra work.

    Facts

    Yonkers Contracting Co. contracted with the State to construct a bridge. After completing the work, Yonkers filed a claim that included the unpaid contract balance, increased fabrication costs due to the State’s rejection of horizontal girder fabrication, and payment for alleged extra work. The State accepted the work on October 20, 1961, but Yonkers did not submit required affidavits until October 24, 1962. The State tendered final payment on November 2, 1962, but Yonkers refused it due to a clause that acceptance would waive additional claims. The contract contained a standard specification that refusal of final payment waived any claim to interest.

    Procedural History

    Yonkers filed a claim in the Court of Claims. The cause of action for the contract balance was severed, and judgment was entered and paid on March 20, 1963, with the interest question reserved. The Court of Claims initially awarded interest. The Appellate Division reversed the interest award and dismissed some of the other causes of action. Yonkers appealed to the Court of Appeals.

    Issue(s)

    1. Whether the State waived the contract’s ‘no-interest’ provision by stipulating to reserve the question of interest on the severed contract balance claim until the resolution of the remaining claims, where the claimant was ultimately successful on one of those claims.

    2. Whether the State breached the contract by refusing to approve the claimant’s proposal to fabricate bridge girders horizontally, thereby entitling the claimant to recover increased costs of vertical fabrication.

    3. Whether the claimant was entitled to additional compensation for alleged extra work not required by the original contract or a supplemental agreement.

    Holding

    1. Yes, because the State’s reservation of the interest question coupled with the claimant’s successful recovery on another claim constituted a waiver of the contract provision. The Court reasoned that otherwise, the claimant would face an unfair choice of either waiving additional claims or forfeiting interest.

    2. No, because the contract and specifications, taken as a whole, contemplated vertical casting, and the State’s refusal to approve horizontal fabrication did not constitute a breach of contract.

    3. No, because the items were either required by the original contract specifications or the claimant was fully compensated for the work performed as required by the contract.

    Court’s Reasoning

    Regarding the interest claim, the Court distinguished its prior holding in Wood v. State of New York, which enforced a similar ‘no-interest’ provision, by relying on Higgins & Sons v. State of New York. The Court stated that Higgins held that the State could waive the ‘no-interest’ provision “by stipulating at the time of the severance of the cause of action for the conceded contract balance that the question of interest be reserved until such time as the remaining portions of the claim were decided.” The court reasoned that reserving the question of interest with the validity of the additional claims hinging upon the resolution of those claims allows for fairness. Here, Yonkers prevailed on its third cause of action. As to the fabrication method, the Court deferred to the lower courts’ findings that the contract specifications, when viewed holistically, indicated that vertical casting was intended. For example, the specifications detailed the girder’s underside when in a vertical position. Regarding the “extra” work claim, the court affirmed the lower courts’ factual findings that the items were either part of the original contract or already covered by a supplemental agreement, precluding additional compensation. The court emphasized that the specifications called for preparation of the concrete deck and that the area covered by the waterproofing substance was consistent with contract requirements.