LAW: The Contractor's Side

Anatomy of a construction dispute-II

Article December 28, 2000
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In my column last month, I began a two-part article on an interesting case arising because of problems with the traffic control plan (see Anatomy of a Construction Dispute, August 1998, p 12). The contractor won a jury verdict and the state DOT appealed. I ended my column by listing several of the state DOT’s arguments and promising this month to provide readers with “the rest of the story.” In this column, I will discuss how the court handled several of the state DOT arguments.

First, the DOT argued that the contractor knew or should have known that the construction plans did not provide for traffic control at ramp B and by submitting its bid, the contractor agreed to perform under any conditions encountered in performing a contract. The court responded that the DOT was aware its plans were incomplete at the time it solicited bids and at the preconstruction conference, the contractor was told by the DOT representatives that any problems that arose from plans would be handled during construction. The court further noted that the DOT’s own documents and FHWA inspection reports raised serious questions as to whether or not the DOT’s traffic control plans for ramp B were ever “workable.” According to the court, the conditions on the project were not such that the contractor could have anticipated such conditions based on its site investigation. Because the contract provisions for extra work necessitated by unforeseen conditions was evidence enough that not every condition is expected to be anticipated.

Traffic control plan

Second, the DOT argued that the contractor was to provide the traffic control plan. The court responded that the contract does not assign responsibility to the contractor for such a plan. In fact, the court noted that the special provisions of the contract refer the contractor to the DOT’s “construction plans for details” of the “stage construction including temporary lane shifts to maintain two-way traffic on S.R. 146.” Finally, the DOT representatives and FWHA officials “decided” on a traffic control plan and explained to the contractor what needed to be done.

Third, the DOT argued that the contractor had failed to give notice under the standard specifications. In response, the court pointed out that forfeitures not favored in the law are ambiguities in the contract and are to be resolved against their existence. The court further stated: “Notice requirements must be reasonably construed. The key issue is whether DOT had actual notice of [appellee’s claims].” The court found that two letters written by the contractor constituted notice and that under the circumstances, the contractor appears to be “in the spirit” of the contract provision. Finally, the court considered that the DOT recognized the problem existed and as a result called the Aug. 15 meeting to work out a solution for staging of traffic.

Fourth, the DOT argued that the trial court had erred on the issue of whether a “force account” existed between the parties, as the DOT had not agreed to creation of such account in writing. The court reviewed the standard specification definition of “extra work” and the specification provision providing that “force account” is a “method of payment for extra work when a supplemental agreement is not arrived at between the engineer and the contractor.” The court noted that the DOT had recognized there were problems prior to the bid and promised that at the preconstruction conference to address those problems. When the contractor asserted that the plans were unworkable, the DOT called a meeting during which the parties reached an agreement to utilize the DOT’s “suggestion” for traffic control under threat from the DOT. The evidence also reflected that the DOT adamantly refused to put its own directive in writing, but insisted that, if the contractor utilized the DOT’s “suggestion,” the plan would become the contractor’s responsibility. When it submitted its claim to the DOT for additional compensation, the contractor submitted daily cost records.

Good faith

Given those facts, the court found that the DOT was under a duty to act in good faith and to negotiate a supplemental agreement to address the cost of the changes. Lacking such an agreement, the contractor was faced with two undesirable choices: (1) either complete the projects by making changes as directed by the DOT, even though the DOT refused to issue a written directive or sign a written agreement; or (2) attempt to construct the project as originally designed, which was not possible.

Fifth, the DOT asserted the contractor was not entitled to attorney fees because the standard specifications clearly disallows such damages. However, a state statute allows such an award “where the defendant has acted in bad faith, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense . . .” The court found there was evidence of bad faith on the part of the DOT in failing to accept responsibility for the defective traffic plans; threatening to withhold payments unless the contractor submitted revised plans; attempting to blame the contractor when the original plans proved unworkable; insisting that the contractor adopt revised plans while refusing to put such directive in writing; and refusing to settle the claims of the contractor in a timely manner.

Sixth, the DOT argued the contractor was not entitled to prejudgment interest because (1) the contract prohibited such interest; (2) the sum allegedly due under the contract was unliquidated; and (3) the jury found prejudgment interest should not be allowed. The court agreed with the DOT, finding it was within the jury’s province to deny such damages as the force account calculation did not liquidate the amount.

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