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A design-build contractor that entered into a fixed-price contract to upgrade the heating, air conditioning and ventilation (HVAC) system in college dormitories satisfactorily performed all the work it was contracted to do, but also performed significant additional work to correct problems with the existing HVAC system that had not been identified at the outset of the project.  Although the additional work was “approved” by the Construction Manager for the University, it was not submitted and approved by the University Purchase Department as required by the contract to obtain a change order.  The court in Mallory & Evans Contractors and Engineers v. Tuskegee University, 2010 WL 5137580 (M.D. Ala., Dec. 2010), granted the University’s summary judgment motion dismissing the contractor’s law suit for breach of contract and unjust enrichment – finding that the contractor requirements were clear and the contractor could not rely justifiably on the purported approval of the changes by the CM.  Nor could the contractor recover under the principles of unjust enrichment or quantum meruit since there was an express contract applicable to the relationship between the contractor and university, and where there is an express contract there can be no implied contract or quantum meruit.

The original contract amount was $3,850,535.  The changes claimed by the design-builder amounted to $765,915.  For the design-builder to prevail on its breach of contract action, it would have to prove the University obligated itself contractually to pay the extra cost for the additional work.  The University argued that the purchase order specifically required prior approval by the Purchasing Department for such changes that exceed the original contract amount and that satisfying that requirement was a condition precedent to any right to be paid extra.  The court agreed.  Even if the CM may have represented that he had authority to approve payment of the extra work, this does not bind the University since it was not the University itself that made any representation to the design-builder that it could rely upon the CM instead of going through the official process required by the terms of the contract.   As stated by the court, “The scope of an agent’s apparent authority is defined based on the principal’s [University’s] representations to third parties concerning the agent’s authority…. Apparent authority ‘rests upon the principle of estoppel, which forbids one by his acts to give another an appearance of authority which he does not have and to benefit from such misleading conduct to the detriment of one who has acted in reliance upon such appearance.”  The University made no such representations in this case, it was only the CM who may have made representations.

With regard to the fact that the design-builder may have encountered “unforeseen contingencies with respect to the amount of work that needed to be done,” the court said that is irrelevant because “The contract did not give [design-builder] a mandate to get the work done no matter the cost.”  The court states that the design-builder “did not protect itself contractually in [its] … proposal for unforeseen contingencies [ and ]  is not entitled to compensation for the additional work simply because it was done.”    No recovery is available for the design-builder under the principles of unjust enrichment or quantum meruit, because the court states “[U]nder Alabama law, claims of both an express and implied contract on the same subject matter are generally incompatible.”  For these reasons, the court granted summary judgment against the design-builder.

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 14, No.2 (Feb 2012).

Copyright 2012, ConstructionRisk.com, LLC