Tag: New Jersey

1
“Pay When Paid” Provision Cannot Indefinitely Delay Payment to Subcontractor
2
Multi-Prime Contractors Have Right of Action Against Each Other If Made Third-Party Beneficiaries
3
Damages Awarded to Plaintiff Stopped from Completing Contract; Calculation Based on the Fair Price of the Entire Work and Lost Profits for Work Not Performed
4
Lack of Privity Does Not Bar Action Against Design Professional for Personal Injury
5
Installation of Air Conditioning Unit Not an “Improvement” within the Context of Statute of Limitations
6
Increased Costs Due to Inaccuracy of Contract Drawings Are Recoverable
7
Court Grants Contractors Damages for Delays Caused by State, Denies Liquidated Damages where State Unable to Establish Extent of Fault of Contractors
8
“Completed and Accepted” Rule Does Not Excuse Architect, General Contractor and Heating Contractor from Liability
9
Lack of Written Document Does Not Preclude Contractor from Recovering in Quantum Meruit for Changes to Initial Plans

“Pay When Paid” Provision Cannot Indefinitely Delay Payment to Subcontractor

Seal Tite Corp. v. Ehret, Inc., 589 F. Supp. 701 (D.N.J. 1984)

In this case, a subcontractor sued the general contractor for failure to pay in a timely fashion, and moved for summary judgment.  Relying on the “pay when paid” provision of the subcontract, the general contractor claimed that it had not yet been paid in entirety by the owner and therefore the lack of payment to the subcontract was not in breach of the contract.  The court ruled that the “pay when paid” clause was designed to postpone payment by general contractor to subcontractor for a reasonable period after work has been completed to afford the general contractor the opportunity to procure from the owner the funds necessary to pay the subcontractor.  The purpose is not to require the subcontractor to wait to be paid for an indefinite period of time.  Accordingly, the court granted the subcontractor’s motion for summary judgment and awarded the amount due under the subcontract.

Multi-Prime Contractors Have Right of Action Against Each Other If Made Third-Party Beneficiaries

Broadway Maint. Corp. v. Rutgers Univ., 447 A.2d 906, 90 N.J. 253 (1982)

In this case, two prime contractors brought suit against the university for damages caused by delays in construction.  In the appeal, the Supreme Court of New Jersey looked at three issues:  (1) whether in an instance of multi-prime contractors each prime contract is liable to the other; (2) whether the owner has a duty to coordinate multi-prime contractors; and (3) whether the exculpatory clause in the prime contracts shielded Rutgers from liability.

The court found that each of the prime contractors, absent privity, had a right of action against the other as long as the contract between the owner and each prime contractor made the remaining contractors third-party beneficiaries.  Second, the court found that an owner entering into multiple prime contracts has the obligation to act in good faith to coordinate the various contractors to avoid unreasonable delay, if the owner has not delegated that responsibility to one of the prime contractors.  Finally, the court found that the exculpatory clause shielded Rutgers from all delays, not just reasonable delays.

Damages Awarded to Plaintiff Stopped from Completing Contract; Calculation Based on the Fair Price of the Entire Work and Lost Profits for Work Not Performed

Zulla Steel v. A & M Gregos, Inc., 415 A.2d 1183, 174 N.J. Super. 124 (N.J. Super. Ct. App. Div. 1980)

In this case, a subcontractor brought an action against the prime contractor for breach after contractor failed to make progress payments when due.  The plaintiff did not complete the project. The court found that the contractor’s failure to make timely payments constituted a material breach and that the plaintiff was therefore justified in terminating its performance.  The court held that the measure of damages in a matter where the plaintiff was stopped from completing the contract is “such a proportion of the entire price as the fair cost of that work bears to the fair cost of the whole work and, in respect to the work not performed, such profits as he would have realized as a result of the complete performance.”  Accordingly, the judgment of the trial court was affirmed, with slight modification.
 

Lack of Privity Does Not Bar Action Against Design Professional for Personal Injury

Conforti & Eisele, Inc. v. John C. Morris Assocs., 418 A.2d 1290, 175 N.J. Super. 341 (N.J Super. Ct. Law Div. 1980)

In this case, a general contractor sued the State and its design professionals for economic damage due to the faulty plans prepared by the design professionals and provided by the State.  There was no privity between the general contractor and the design professional defendants.  However, the court found that a design professional can be held responsible for the losses suffered by a contractor regardless of privity.  The decision was based on a line of New Jersey cases that look with disfavor on the privity doctrine especially with regard to design negligence and physical injuries sustained by third-parties.  The court created a test to determine whether liability should be imposed on design professionals when third-parties are injured.  The elements are:  (1) the extent to which the transaction was intended to affect the plaintiff; (2) the foreseeability of harm to him or her; (3) the degree of certainty that the plaintiff suffered injury; (4) the closeness of the connection between the defendant’s conduct and the injuries suffered; (5) the moral blame attached to the defendant’s conduct; and (6) the policy of preventing future harm.
 

Installation of Air Conditioning Unit Not an “Improvement” within the Context of Statute of Limitations

Rolnick v. Gilson & Sons, Inc., 617 A.2d 288, 260 N.J. Super. 564 (N.J. Super. Ct. App. Div. 1992)

This case concerned a property that was severely damaged by a fire allegedly caused by a defective fan component in the air conditioning system.  The trial court applied the statute of limitations that bars claims over ten years after improvement, finding that the installation of an air conditioning system was an "improvement" within the meaning of the statute.  The appellate court reversed, finding that a mass produced and marketed attic ventilation fan was not an “improvement” within the meaning of the statute and thus the action was not barred.
 

Increased Costs Due to Inaccuracy of Contract Drawings Are Recoverable

Golomore Assoc. v. N.J. State Highway Auth., 413 A.2d 361, 173 N.J. Super. 55 (N.J. Super. Ct. App. Div. 1980)

In this case, the court evaluated a claim by a contractor and subcontractor against the State for additional costs of construction. Plaintiffs claimed that the increased costs were due to faulty evaluations of ground elevation provided by the State prior to bidding. The bid submitted to the State was calculated using those faulty measurements and therefore did not adequately predict actual expenses. The court ruled in favor of the plaintiffs, finding that the elevations provided by the State constituted positive averments. Therefore, when the elevation data was shown to be incorrect, contractors were entitled to recover for additional costs.
 

Court Grants Contractors Damages for Delays Caused by State, Denies Liquidated Damages where State Unable to Establish Extent of Fault of Contractors

Buckley & Co. v. State, 356 A.2d 56, 140 N.J. Super. 289 (N.J. Super. Ct. Law Div. 1975)

In this case, the court adjudicated a claim by two construction companies against the State regarding the construction of Route 78.  The project, namely the creation of a section of the road that involved various bridge constructions as well as electrical, drainage and related work, was finished 87 days later than was provided in the contract and various change orders and 564 days later than the original completion date.  Consequently, the contractors filed suit for delay damages which included various overhead expenses and wages for employees.  The contractors also sought the return of monies withheld by the Department of Transportation as “liquidated damages” for the delay.  The State contended that the delays were the contractors’ fault, that the reasons for the delays given by the contractors did not occur, and that claims for costs were barred by no-damages clauses included in the contract.  The court, concluding that some of plaintiff’s losses were the result of breach by the State, allowed recovery for those losses accordingly.  The court declined to allow the State to withhold liquidated damages where the delay could be attributed actions and inaction by both parties as well as circumstances beyond either party’s control.  The court also held that the construction company had standing to assert claims on behalf of subcontractors.
 

“Completed and Accepted” Rule Does Not Excuse Architect, General Contractor and Heating Contractor from Liability

Totten v. Gruzen, 245 A.2d 1, 52 N.J. 202 (1968)

In this case, the Supreme Court of New Jersey held that the “completed and accepted” rule does not render defendants immune from liability for injuries sustained from a faulty heating system.  A child resident of a multi-family housing project sustained serious burns from contact with exposed, hot piping that was part of the radiator heating system in the child’s bedroom.  The court found that the lack of privity between the plaintiffs and the defendants was insufficient to excuse the defendants from liability.
 

Lack of Written Document Does Not Preclude Contractor from Recovering in Quantum Meruit for Changes to Initial Plans

Home Owners Const. Co. v. Borough of Glen Rock, 169 A.2d 129, 34 N.J. 305 (1961)

In this case, the court looked at whether a contractor could recover in quantum meruit for services and materials actually provided, even though the work was not authorized in writing.  During the course of construction, the Borough requested the contractor to perform certain extra services and provide additional materials.  Upon the Borough’s refusal to pay these additional expenses, the contractor sought to recover in quantum meruit.  The court found that the lack of writing authorizing these changes did not preclude the contractor from recovery.
 

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