As we discussed in the last blog post, Otis Elevator installed four escalators. Otis’ shop drawings were approved before work was nearly completed, but the owner refused to accept the work. The escalators had to be changed and Otis wanted to be paid for the change ordered work. The general refused and Otis had to file suit against the general to get paid for its work.
During the litigation, the general contractor claimed that the contract prevented Otis from bringing the lawsuit. Specifically, the general contractor cited to the contract language that stated:
If there is any conflict, ambiguity, or inconsistency within or between [the contract documents] or a difference in interpretation, the matter shall be referred to the appropriate design professional whose decision the subcontractor shall implement at no additional cost.
The general contractor claimed that the above language bound Otis to the architect’s decision that the plans called wider step width than those originally proposed by Otis.
The court disagreed and ruled that the architect’s decision was reviewable where there is evidence of fraud or such gross mistakes as would imply bad faith or a failure to exercise honest judgment. The court found that the architect did not exercise honest judgment by:
- Having an intern draft the escalator drawings;
- Approving the shop drawings and stamping them with “Concept conforms with Design Concept”; and
- Failing to identify any problem with Otis’ construction during the architect’s on-site inspections.
Here the court found that the architect’s final say was reviewable because the architect demonstrated dishonest judgment or bad faith. But, if the architect had performed his work well, Otis could have been stuck with the decision to implement the change, and at no additional cost.