{"id":897024,"date":"2020-02-04T14:47:08","date_gmt":"2020-02-04T21:47:08","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=897024"},"modified":"2020-02-04T14:47:15","modified_gmt":"2020-02-04T21:47:15","slug":"words-actions-bind-terms-of-subcontract-agreement","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/words-actions-bind-terms-of-subcontract-agreement\/","title":{"rendered":"Think Before You Speak: Words and Actions Can Bind You Beyond The Terms of a Previously Agreed Upon Subcontract Agreement"},"content":{"rendered":"\n<p>Sonia Russo | <a href=\"https:\/\/www.nycomdiv.com\/2020\/01\/think-before-you-speak-words-and-actions-can-bind-you-beyond-the-terms-of-a-previously-agreed-upon-subcontract-agreement\/\">Farrell Fritz<\/a><\/p>\n\n\n\n<p>Our parents taught us to think before we speak.&nbsp; That lesson is especially important when words or conduct could cost you hundreds of thousands of dollars beyond what was previously agreed upon in a subcontract agreement.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"alignright\"><img decoding=\"async\" src=\"https:\/\/www.nycomdiv.com\/wp-content\/uploads\/sites\/381\/2020\/01\/shutterstock_609257708-320x234.jpg\" alt=\"\" class=\"wp-image-8704\"\/><\/figure><\/div>\n\n\n\n<p>In a recent case before\u00a0Justice Andrea Masley,\u00a0Corporate Electrical Technologies, Inc. v. Structure Tone, Inc. et al., Plaintiff Corporate Electrical Technologies, Inc. (\u201cCET\u201d), a subcontractor, was\u00a0hired by Structure Tone, Inc. (\u201cSTI\u201d), a general contractor, to perform electrical work on a multi-million dollar renovation project at a Macy\u2019s flagship store in Herald Square, in anticipation of the holiday shopping season.<\/p>\n\n\n\n<p>CET argued that soon after the renovation work commenced, the project was delayed to the point that Macy\u2019s took over the day-to-day running of the renovation project. Once Macy\u2019s took over, it directly negotiated with CET and requested that CET perform extra work beyond CET\u2019s subcontractor agreement with STI. Based on the additional work performed, CET submitted numerous unpaid change orders and brought this action against STI and Macy\u2019s, alleging that it was owed over a million dollars for the project.<\/p>\n\n\n\n<p>With respect to CET\u2019s cause of action for\u00a0<em>quantum meruit<\/em>, Macy\u2019s\u00a0moved for\u00a0summary\u00a0judgment\u00a0under the theory that Macy\u2019s, as an owner, was not in contractual privity with CET, and therefore, could not be held liable to the subcontractor.<\/p>\n\n\n\n<p>Typically, an owner\u00a0is not\u00a0liable to a subcontractor and the\u00a0subcontractor\u2019s quasi contract claims against a property owner are precluded where the owner contracts with a general contractor and does not expressly consent to pay for a subcontractor\u2019s performance (DL Marble &amp; Granite Inc. v. Madison Park Owner, LLC).<\/p>\n\n\n\n<p>However, a property owner can be equitably bound to pay the reasonable value of the work it directed where, as in\u00a0this case, Macy\u2019s project manager\u00a0emailed CET directly and seemed to implicate that Macy\u2019s would pay costs that CET incurred as an incentive to completing the required work on time.<\/p>\n\n\n\n<p>The Court noted that even where a contract provides that any extra work must be supported by a written authorization signed by the owner, an owner\u2019s conduct can constitute a waiver of that requirement where the owner orally directs work and knowingly receives and accepts the benefits of that extra work.&nbsp; In that instance, the owner can be found liable to pay the reasonable value of the extra work, notwithstanding the provisions of the subcontract.<\/p>\n\n\n\n<p>CET also\u00a0moved for spoliation sanctions\u00a0against Macy\u2019s, arguing that Macy\u2019s should have reasonably anticipated litigation based on its disagreements with CET.\u00a0\u00a0CET asserted that Macy\u2019s neglected to place a hold on its automatic email destruction policy which resulted in the destruction of hundreds, and perhaps thousands, of critical internal emails related to CET\u2019s work on the project during the time when the project was planned and constructed.\u00a0 CET argued that these destroyed emails would have supported its theory that STI\u2019s poor management caused the numerous project delays and would have disproved STI\u2019s and Macy\u2019s allegations that CET was to blame for the delays.<\/p>\n\n\n\n<p>The Court&nbsp;<a href=\"http:\/\/www.nycourts.gov\/reporter\/pdfs\/2020\/2020_30085.pdf\">held<\/a>&nbsp;that CET failed to show that Macy\u2019s had an obligation to preserve relevant emails because&nbsp;Macy\u2019s could not reasonably anticipate litigation.&nbsp; Mere delays of work, engagement of another subcontractor, and disagreements about the project could not have placed Macy\u2019s on notice of a credible probability that it would become involved in litigation.&nbsp; Rather, there needed to be something more amounting to repeated threats to terminate the&nbsp;agreement, transmissions of breach letters, or a formal termination of the agreement.<\/p>\n\n\n\n<p><strong>Takeaway:&nbsp;<\/strong>&nbsp;(1) Property owners should be wary of solely relying on the explicit terms of a subcontract agreement when it comes to payment for a subcontractor\u2019s work.&nbsp; Ultimately,&nbsp;an&nbsp;owner\u2019s words or actions can be interpreted as express consent to pay for a subcontractor\u2019s performance; and (2) In the commercial context, run of the mill disagreements during construction are not enough to place a party on notice of a credible probability of litigation.&nbsp; Even so, a company that routinely engages in&nbsp;business that has the potential of developing into litigation should review and be aware of its email retention\/destruction policy in this new age of electronic discovery.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Sonia Russo | Farrell Fritz Our parents taught us to think before we speak.&nbsp; That lesson is especially important when words or conduct could cost you hundreds of thousands of dollars beyond what was previously agreed upon in a subcontract agreement. In a recent case before\u00a0Justice Andrea Masley,\u00a0Corporate Electrical Technologies, Inc. v. Structure Tone, Inc.&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/words-actions-bind-terms-of-subcontract-agreement\/\">Continue reading <span class=\"screen-reader-text\">Think Before You Speak: Words and Actions Can Bind You Beyond The Terms of a Previously Agreed Upon Subcontract Agreement<\/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":[9],"tags":[9895,10998,224,318],"class_list":["post-897024","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-advise-consult","tag-construction-agreement","tag-construction-contract","tag-electronic-discovery","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>Think Before You Speak: Words and Actions Can Bind You Beyond The Terms of a Previously Agreed Upon Subcontract Agreement - Advise &amp; 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