{"id":892296,"date":"2017-06-07T14:14:11","date_gmt":"2017-06-07T20:14:11","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=892296"},"modified":"2017-06-07T14:14:11","modified_gmt":"2017-06-07T20:14:11","slug":"three-things-to-consider-before-terminating-your-construction-contract","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/three-things-to-consider-before-terminating-your-construction-contract\/","title":{"rendered":"Three Things to Consider Before Terminating Your Construction Contract"},"content":{"rendered":"<p>Joshua M. Pellant | <a href=\"https:\/\/www.faegrebd.com\/three-things-to-consider-before-terminating-your-construction-contract\" target=\"_blank\">Faegre Baker Daniels<\/a> | June 5, 2017<\/p>\n<p>The design and construction process is extraordinarily complex, and it rarely proceeds as planned and almost never conforms strictly to the contract documents. These documents often include hundreds of pages of general and special conditions, hundreds of drawing sheets, and thousands of pages of specifications containing words and symbols of great significance to those in construction, but of little meaning to laypersons.<sup>1<\/sup>\u00a0This can make it difficult for courts to determine whether a deviation from the contract documents is \u201cmaterial\u201d enough to trigger contractual or legal remedies. Here are three things to consider when making an initial determination whether the breach of a construction contract is \u201cmaterial\u201d \u2014 i.e., whether it matters enough to trigger legal rights to recover damages or even terminate the contract altogether.<\/p>\n<h2>Understand the General Test for Materiality<\/h2>\n<p>Determining whether a breach is material will depend on a variety of factors, including the facts of the dispute, the terms of the contract and the case law in your jurisdiction. A generally accepted standard is that a breach is material when it \u201creasonably endangers future performance of executory contract obligations so as to go \u2018to the heart of the contract\u2019 and \u2018defeat the very object of the contract.\u2019\u201d<sup>2<\/sup>\u00a0Some questions to ask in making this determination include:<sup>3<\/sup><\/p>\n<ul>\n<li>Does the breach demonstrate a clear unwillingness or inability of the breaching party to perform going forward?<\/li>\n<li>Has the contract already been substantially performed by the breaching party?<\/li>\n<li>Can the breach be remedied solely by monetary damages?<\/li>\n<li>Has the breaching party been given notice of the breach and an opportunity to cure?<\/li>\n<li>Has the non-breaching party taken any action after the breach that would negate the materiality of the breach?<\/li>\n<\/ul>\n<h2>Read and Understand the Contracts<\/h2>\n<p>Construction contracts will often provide a detailed procedure for providing notice of an alleged breach, any requisite opportunity to cure and what remedies are available (or not available). The contract may define, by type or category, what constitutes a \u201cmaterial\u201d breach. Finally, the contract may contain provisions for converting material breaches into claims that are compensable as damages under the contract. These provisions are generally enforceable, and they act to limit the non-breaching party to a pre-defined amount of monetary damages or other relief.<sup>4<\/sup>\u00a0Thus, it is critically important to understand any contractual provisions that may define, or limit, what is considered a material breach of the contract.<\/p>\n<h2>When in Doubt, Treat the Breach as Immaterial<\/h2>\n<p>Mistakenly determining that a breach\u00a0<em>is<\/em>\u00a0material \u2014 and triggering a right to terminate \u2014 can carry severe consequences. If a court later determines that the breach was not material, and therefore termination was unjustified, it can expose the party asserting a material breach to significant liability and damages.<sup>5<\/sup>(Discussing cases where owners were held responsible for a) completion costs, b) lost profits and c) extra-contractual \u201cbad faith\u201d damages.)\u00a0When in doubt, treat the breach as immaterial and seek a remedy lesser than termination, such as specific performance or monetary damages.<\/p>\n<p><sup>1<\/sup>\u00a0Philip L. Bruner &amp; Patrick J. O\u2019Connor, Jr.,\u00a0<em>Bruner &amp; O\u2019Connor on Construction Law<\/em>, \u00a7\u00a018:2\u00a0(Dec. 2016 Update).<br \/>\n<sup>2<\/sup>\u00a0Philip L. Bruner &amp; Patrick J. O\u2019Connor, Jr.,\u00a0<em>Bruner &amp; O\u2019Connor on Construction Law<\/em>, \u00a7\u00a018:1\u00a0(Dec. 2016 Update).<br \/>\n<sup>3<\/sup>\u00a0Philip L. Bruner &amp; Patrick J. O\u2019Connor, Jr.,\u00a0<em>Bruner &amp; O\u2019Connor on Construction Law<\/em>, \u00a7\u00a018:4\u00a0(Dec. 2016 Update).<br \/>\n<sup>4<\/sup>\u00a0<em>Ibid<\/em><br \/>\n<sup>5<\/sup>\u00a0Philip L. Bruner &amp; Patrick J. O\u2019Connor, Jr.,\u00a0<em>Bruner &amp; O\u2019Connor on Construction Law<\/em>, \u00a7\u00a018:3\u00a0(Dec. 2016 Update).<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Joshua M. Pellant | Faegre Baker Daniels | June 5, 2017 The design and construction process is extraordinarily complex, and it rarely proceeds as planned and almost never conforms strictly to the contract documents. These documents often include hundreds of pages of general and special conditions, hundreds of drawing sheets, and thousands of pages of&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/three-things-to-consider-before-terminating-your-construction-contract\/\">Continue reading <span class=\"screen-reader-text\">Three Things to Consider Before Terminating Your Construction Contract<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[14,9],"tags":[9895,224],"class_list":["post-892296","post","type-post","status-publish","format-standard","hentry","category-construction-2","category-construction-contracts","tag-advise-consult","tag-construction-contract","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Three Things to Consider Before Terminating Your Construction Contract - Advise &amp; 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