07/31/2018

Editor’s Notes

Construction contract disputes are usually strictly business matters. What did the contract say? How did it allocate risk? How does it apply to the facts of this project? Sometimes, however, these disputes involve drama – claims of scheming, trickery and betrayal. This issue includes two cases of that nature.


A New Jersey contractor alleged a project owner had pulled a “switcheroo” with the contract drawings. The owner provided bidders with a CD with drawings to be used for pricing the work. After contract signing, said the contractor, the owner slipped a disk into the binder containing the contract documents. The drawings on the new CD were more demanding, and expensive, than the original set. The case also involved whether a contractor's employee's testimony regarding the changed drawings was considered to be "expert" or not.

 

In the second case, a Texas subcontractor recovered from its former vice president for breach of fiduciary duty. A court ruled that when the sub’s insurance coverage lapsed, the VP did not cure the problem but notified the prime contractor of the lapse. The prime then terminated the subcontract for default and awarded a replacement subcontract to a shell corporation owned by the VP. The prime contractor was held jointly liable for its knowing participation in the scheme.

 

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