In the hustle and bustle of completing a construction project it can be easy to overlook the importance of the contract. However, when a dispute arises the contract generally dictates the outcome of that dispute. A recent unpublished Massachusetts Appeals Court decision serves as a reminder of the importance of the contract.
In ACME Abatement Contractor, Inc. v. S&R Corp., 88 Mass. App. Ct. 1102 (2015), the plaintiff subcontractor entered into a contract to perform asbestos removal for a contractor on a public project. During the course of the project, the contractor directed the subcontractor to remove paint at the project. The subcontractor refused to perform the work claiming that because the paint did not contain asbestos it did not have an obligation to perform the extra work. The contractor ultimately hired another contractor to perform the work and refused to pay the subcontractor the balance of its contract price. As a result, the subcontractor filed suit against the contractor seeking payment for its unpaid contract balance. In response the contractor filed a summary judgment motion seeking to dismiss the claim. The contractor argued that the subcontractor’s refusal to perform the work constituted a material breach of the contract precluding the subcontractor’s recovery of its contract balance. The appeals court agreed and affirmed the trial court’s decision dismissing the subcontractor’s claim.
In support of its decision, the court relied solely upon the terms of the contract. Specifically, the court noted that the contract required the subcontractor to proceed with work or extra work even in the event of a dispute. The contract further provided that the failure of the subcontractor to perform such work “shall constitute a material breach of [the] agreement…” As a result, the court held that the subcontractor’s failure to perform the disputed extra work constituted a material breach of the contract precluding recovery of its contract balance. The court further held that the subcontractor’s failure to perform the extra work also precluded its recovery under the equitable theory of quantum meruit. In support of its conclusion the court noted that in order to recover under quantum meruit, the subcontractor must demonstrate that “there is an honest intention to go by the contract, and a substantive execution of it…”
The language contained in the subcontract in this case is not uncommon. In fact, paragraph 15.1.3 of the AIA A201 contains a similar requirement for the contractor to continue with performance of the work pending resolution of a claim. Notably the AIA A201 does not state that failure to comply with the provision is a material breach of the contract, however this decision could be seen as persuasive authority to reach a similar conclusion involving a project using the AIA A201 contract form. Therefore, when a dispute arises during the course of a project it is critical that each party review the terms of the contract to ensure compliance with its terms and avoid taking action that could ultimately preclude recovery under the contract and law.
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