LAW: The Contractor's Side

Relying on representations

Article December 28, 2000
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Many grading contract disputes center on whether a contractor has the right to rely on representations in the plans and specifications. In most states, the DOT’s standard specifications include a site investigation clause under which the bidder agrees he is fully informed of all of the site conditions. In Bernard McMenamy Contractors Inc., v. Missouri State Highway Commission, 582 S.W.2d 305 (Mo. App. W.Dist. 1979), a Missouri appeals court considered whether the contractor could rely on representations by the DOT in the plans.

On Sept. 25, 1969, the Missouri State Highway Commission (“commission”) contracted with Bernard McMenamy (“McMenamy”) to construct 7.506 miles of I-55 in Cape Girardeau County for a total estimated price of $6,757,715.45. The bid items included 1,712,948 cu yd of “Class A” excavation at $0.71 per cu yd and 100,357 cu yd of “Class C” excavation at $2.60 per cu yd. The contract specification defined “Class A” excavation as “all roadway and drainage excavation not classified as “Class C”, sand-stone or igneous rock.” “Class C” excavation was defined as “the removal of stone in ledges six inches or more in thickness..”.

The plans indicated that rock would be encountered at 10 locations. The plans were based on information available from surveys and studies. The plans did not specifically indicate the character of rock to be excavated. All of the information available to the commission about the anticipated rock was not provided to bidders. However, the design cross-section for rock areas indicated back slopes of 1/4:1 (almost vertical) in the rock cuts.

A change in plans

In actuality, McMenamy encountered rock in 23 separate locations during construction. Also, at these locations, the slopes could not be built as indicated. McMenamy nonetheless completed the work and the project was finally accepted as completed in September 1973. McMenamy was paid a total of $6,753,847.53 by the commission - an amount which, after deduction for liquidated damages and other adjustments, was less than the face contract amount. Within the payment, McMenamy was paid at unit price for the excavation of 146,508 cu yd of “Class C” excavation.

In November 1974, McMenamy filed a claim for additional payment under the contract and the remission of $60,000 liquidated damages. The commission rejected the claim, but remitted $1,500 of the liquidated damages.

. Subsequently, McMenamy brought suit against the commission claiming that the conditions encountered at the site differed materially from the positive representation in the plans, that the back slopes would be constructed in solid ledge rock and that the commission knew the conditions were not as represented.

At the trial, McMenamy’s chief engineer testified that the plans showed rock cuts on a 1/4:1 slope, which indicated the rock was very stable. However, as built, there was no cut on the project comprised of 100% ledge rock, or “Class C” excavation. Instead, McMenamy had found pinnacles of rock with plastic clay crevices and formations of boulders embedded in plastic clay. As a result, vertical slopes were constructed in only a few areas. Instead of 1/4:1, as represented in the plans, most slopes were of variable slope and had to be constructed anywhere from 1/2:1 up to a 2:1 slope. He also testified that the commission failed to disclose the pertinent geologist report, which depicted the actual character of the subsurface conditions as different from that represented in the plans.

The commission argued that the contract quantities were only estimates and the 1/4:1 slopes shown on the commission cross-sections did not represent only solid ledge rock. The commission further relied on the site investigation clause.

The trial court entered judgment in favor of McMenamy for a recovery of $418,904.41. The commission appealed to the Missouri Court of Appeals. That court noted that Missouri courts had previously refused to find an implied warranty of sufficiency for the plans and specifications. In this case, however, the court ruled in McMenamy’s favor on the misrepresentation claim.

Though disagreeing on the amount of McMenamy’s damages, the court found there was a positive representation in the plans which showed 1/4:1 back slopes. Because such back slopes could be constructed only in solid ledge rock, the evidence sufficiently established an affirmative misrepresentation regarding the character of rock to be excavated. Thus, the court permitted McMenamy to recover the extra cost it incurred as a result of the material encountered being other than ledge rock.

Comment

As discussed above, the court required proof of an affirmative misrepresentation before it allowed a recovery based on breach of warranty of plans. This case demonstrates that a general disclaimer as to accuracy of information furnished by the DOT may not be sufficient to overcome specific errors or misrepresentations. It further illustrates that it is important to argue the appropriate legal theory. In future columns, I will discuss other cases involving site condition claims.

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