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General contractor removed its roofing subcontractor’s equipment and materials from the job site based on alleged late performance, and it then terminated the roofer without following the contractually required notice requirements. Court held the GC interfered with subcontractor performance and the contract termination was wrongful.  De Avila v. Espinsoz Metal Bldg. & Roofing Contractors, 564 S.W. 3d 150 (Tex. 2018)

A provision in the subcontract allowed the GC to terminate the sub without cause upon 48 hour written notice. The matter giving rise to the dispute was that when the roofing sub was almost complete with its work, other contractors on the project began drilling holes through the completed roof for HVAC installation — resulting in the roofer having to install new insulation, bonding adhesive, roofing material, and counter flashing in order to maintain the manufacturer’s 20 year warranty.

The GC refused to accept and pay for the sub’s proposed change order for the extra work. At first, the GC simply failed to acknowledge or respond to the change order request. Instead, the GC, in the words of the court, started “a quarrel” with the sub regarding the quality of the work and ultimately wrote to the sub asserting that the sub failed to complete the roofing work in a timely fashion and demanded that it be corrected no later than December 10 – but did not even mention the HVAC issue.

Complying with the GC demand, the sub went to the project site on December 1 to perform the work only to discover that all of his remaining material and work supplies were missing. Believing them to have been stolen the sub called the police and was in the process of filing a report when the GC arrived at the site and explained that he was the one that had removed the materials and supplies.

The sub did no further work after this. It subsequently sued the GC for the damages under the subcontract and the GC countersued. The trial court found (affirmed on appeal) that the GC breached the contract due to wrongful interference with the sub’s ability to perform its work under the contract.

As to the GC’s argument that he was entitled to terminate the contract at his convenience, the court found that the GC failed to provide the required 48 hour notice, and had in fact continued to request the sub to complete the work right up until the point where he simply hired another subcontractor to do it.

Comment: Terminating a contractor is a big deal and has serious potential ramifications. This particular case didn’t involve any surety bond. If it had, the stakes would have been even greater. It is essential to meet the contract requirements concerning written notice of intended termination. This is a good reminder that project owners or contractors that might feel so inclined to remove or hide the materials and supplies of a contractor or subcontractor should discuss this with their attorney before doing so – because, as noted by the decision, that can most definitely establish intentional interference with performance of the contract and thereby relieve the contractor of further duty to perform.

 

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 ConstructionRisk 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. 21, No. 2 (June 2019).

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