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ConstructionWebLinks.com
The
University of Montana solicited bids from contractors for
its Family Housing Phase II project. James Talcott Construction
Co. bid and was awarded the prime contract. The project
completion date was May 31, 1997, which was extended to
June 30, 1997. Keeney Construction was the site work subcontractor
to Talcott. They entered into a subcontract. When Keeney
completed its work was disputed, but Keeney received a Certificate
of Substantial Completion on October 1, 1997.
Keeney
sued Talcott for breach of contract, seeking damages for
delayed completion and extra work. Keeney contended that
it and Talcott had discussed a December 1996 completion
date for Keeney's work at a pre-construction meeting. But
two days later, Keeney agreed in the subcontract "[t]o
complete the work of this Subcontract as required by job
progress or within the following time limits: As directed
by James Talcott Construction, Inc. Time is of the essence
on this project."
Talcott
moved for partial summary judgment. The trial court granted
partial summary judgment, and the Montana Supreme Court
affirmed. Keeney Construction v. James Talcott Construction
Co, Inc., 309 Mont. 226, 45 P.3d 19 (2002).
In
affirming, the Supreme Court held that courts must determine
the intent of the parties to a contract only from the contract
when its terms are unambiguous. It found that the subcontract
contained no ambiguity.
The
contract clearly stated that the subcontractor "agreed
to work at the direction" of the prime contractor.
"Thus, the Subcontract clearly authorized Talcott to
set Keeney's completion schedule," the Supreme Court
held. In support, it cited McDaniel v. Ashdon-Mardian
Co., 357 F.2d 511 (9th Cir. 1966), holding that "as
directed by" language gave the general contractor the
right to direct and control when the subcontractor did its
work.
Keeney
argued that the subcontract was modified by the minutes
of a pre-construction meeting. The court wrote that it would
consider evidence of a prior oral agreement only if the
contract were ambiguous. Otherwise, there would be no certainty
about contract. The court found that the contract was not
ambiguous. It noted that contractual procedures had not
been followed for setting a December 1996 completion date
for Keeney.
The
Supreme Court also found there was no clear consensus in
non-Montana cases on whether subcontractors could recover
delay damages while under contract to work "as directed
by" the general contractor. But, it noted that the
9th Circuit in McDaniel enforced such a provision.
Keeney
argued that to bar it from recovering delay damages would
enforce an exculpatory clause, which is against the public
policy of Montana. But, the Supreme Court pointed out that
the contract did not exculpate Talcott from its negligent
or willful violations of laws or legal duties. Rather, the
subcontract simply authorized Talcott to direct the timing
for performing work and completion. The clause did not violate
public policy and was enforceable against Keeney, the Supreme
Court held.
Keeney's
claims for extra work were rejected because Keeney failed
to follow subcontractual procedures for submitting claims.
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