Imagine that you are on a job that is significantly delayed. You tell the upstream contractor that performance at this late date will cost more money. Instead of being offered more money, you are told that you have to “mutually agree” on a revised schedule. How do you do that?
One subcontractor in Oklahoma found out the hard way that walking off the job was not the answer. The case, Ross Group Construction v. Riggs Contracting, involved a construction project at Tinker Air Force Base. The project was supposed to start in October, 2009, Riggs did not sign the subcontract until December, 2009. (perhaps that should have tipped Riggs off that the project would be delayed) The government experienced site problems and Riggs could not start work for a few more months. Riggs had enough and said it could only perform for an extra $144,000. The general contractor said no way and terminated Riggs, it then sued Riggs and made a claim on its performance bond.
Before the court, Riggs argued that the delay made it unreasonable for it to perform. The general contractor argued that contract required Riggs to perform whenever the general contractor said so. The court disagreed with both parties and found that the contract required the parties, both general and subcontractor, to “mutually agree” on the construction schedule. Because Riggs was required to work with the general contractor on an agreeable schedule, its refusal to perform without additional compensation was not reasonable and a breach of the agreement.
Important in the court’s decision was the conclusion that Riggs’ economic difficulties did not create an impossibility of performance that would excuse its performance. Riggs’ knowledge of the delays when it signed the contract and its knowledge of future anticipated delays led the court to conclude that the economic difficulties in performing did not make it impossible for Riggs to perform.
This is an odd result. If Riggs had not refused to perform the job, but simply said the parties could not “mutually agree” on a schedule, what would have happened? Would it have come down to which party was not being reasonable? That sounds like a recipe for litigation.
Take Away: Review your contract to determine whether it requires you to mutually agree to a schedule if the project is delayed. If it does contain this language, make sure you are at the table negotiating for a mutually agreed to schedule, whatever that is.
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