Under the terms of virtually every construction contract ever drafted, the contractor’s acceptance of final payment operates as a waiver and release of any existing claims. A Texas contractor recently tried to have it both ways. The contractor submitted an invoice for the contract balance. But, the transmittal letter said the contractor reserved its rights under an existing, unresolved differing site condition claim.
The owner issued a check for the invoiced contract balance and the contractor deposited it. The contractor then argued that this had not been true “final payment” because the reservation of rights letter notified the owner that the contractor expected additional compensation. In a recent case, however, a contractor completed subcontracted work with its own forces and charged the sub for labor at average burdened rates from an R. S. Means estimating guide. The sub had attempted to subpoena the contractor’s payroll records, but the discovery deadline had passed. The subcontractor vehemently opposed the use of average wage rates from an estimating guide, but the contractor was allowed to get away with it.
One can only assume that a party would use a secondary source rather than its own actual cost documentation only because it was financially advantageous to do so. Shouldn’t any party asserting a charge for work performed be required to document that charge with records of actual costs?
Should a party ever be allowed to withhold cost records and proceed using estimates from secondary sources? As always, I welcome your comments.
Featured in the January 4th issue of Construction Claims Advisor:
- Contractor Could Not Reserve Claim While Accepting Final Payment
- Owner Guaranteed Contractor’s Payment of Allowance
- Proposal Downgraded Without Any Mention During Discussions