Several months ago, I wrote about an escalator subcontractor that sued a general contractor, demanding payment for work completed based on approved shop drawings. The trial court agreed with the subcontractor, but the general contractor appealed. Ten months later, the Court of Appeals reversed, finding that the subcontractor had a duty to bring to the general contractor’s attention major discrepancies or errors they detect in the bid documents.
The subcontractor failed to disclose ambiguities in the plans and must suffer the peril.
The subcontractor installed 32 inch escalators throughout the project, but the plans called for 40 inch escalators. The general contractor and subcontractor could not reach agreement on how the dispute should be resolved. The subcontractor sued the general to get paid for replacing the escalators and the general sued to subcontractor for concessions it had to pay to the owner.
What happened at trial?
The court decided that the contract documents were ambiguous because they did not specify the width of the escalators. The general contractor argued that certain tick marks and dots on the drawing, in addition to the scale, showed that the escalator should have been 40 inches wide. The court disagreed, finding that the scale was off 3 to 3 ½ inches.
The court concluded that the plans were ambiguous and Otis was well justified in submitting a bid for a 32 inch step. The court also found it significant that both the contractor and the architect approved Otis’ plans that clearly showed a 32 inch stair width. Based on these conclusions, the court found that Otis did not breach the contract and was entitled to be paid for the work performed in installing the 40 inch escalator.
What happened on appeal?
The Court of Appeals reversed the trial court ruling that a subcontractor that knows of an ambiguity must question it. Here, the subcontractor’s estimator testified that he noticed that the drawings were unclear when he was preparing the bid. And, there was nothing in the record which indicated that the subcontractor asked for a clarification. Specifically, the estimator admitted that he did not ask about step width or what the tick marks on the drawing were supposed to indicate. The estimator’s failure to ask for clarification meant that it bore the risk that the general contractor would adopt a different, reasonable interpretation.
Take Away: Your estimators should be discussing ambiguities in plans with upstream contractors and documenting those discussions so that it is clear, years later, exactly what was discussed.
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