Contract; breach; Repudiation; Rescission
By Lauren Tucker | Staff Writer
Plaintiff is a construction company, who entered into a contract with a non-party to provide general construction services. Defendant is a framing company. Plaintiff entered into a contract (“Subcontract”) with defendant to provide framing services for the construction project. During this meeting, the Subcontract was not successfully signed by plaintiff. Plaintiff later countersigned the Subcontract and sent it to defendant via Federal Express to the address set forth in the Subcontract. However, defendant’s address had changed in the interim and defendant claimed that the fully executed Subcontract was never delivered. Over the next several months, both plaintiff and defendant indicated concern over certain issues relating to their business relationship. Plaintiff grew concerned by delays in defendant’s hardware submittals and by the failure of defendant to return calls and emails. Defendant grew concerned about plaintiff’s delays in approving change orders and fixing a firm start date. With concerns continuing to grow, plaintiff’s project manager sent an email to defendant stating that plaintiff would begin soliciting pricing from other local framers.
Defendant informed plaintiff that it considered the email to represent a wrongful termination of the Subcontract, and alternatively, that the parties never had a valid Subcontract because plaintiff failed to return a countersigned copy to defendant or advise defendant in writing that the Subcontract had been countersigned within the required time period. Plaintiff maintained that the email was not a termination notice and was not issued pursuant to the termination provisions of the Subcontract, and offered proof that the Subcontract had been executed and delivered to defendant timely. Plaintiff further sought assurances from defendant that it would continue to honor the Subcontract. When defendant did not respond to plaintiff’s notices, plaintiff issued a notice of termination of the Subcontract, and hired replacement contractors to complete the work called for under the Subcontract.
Plaintiff sought damages for defendant’s alleged unjustified repudiation of the Subcontract and for its failure or refusal to perform thereunder. In an amended answer, defendant alleged that it was not bound by the Subcontract due to plaintiff’s failure to give timely notice of acceptance, and that, even if the Subcontract remained in effect, plaintiff wrongfully terminated it via the email. Defendant raised two counterclaims, seeking damages from plaintiff’s breach of the Subcontract and recovery for unjust enrichment.
The court held that defendant manifested a clear and unmistakable intention to waive its right of rescission. Further, the defendant’s invocation of rescission was also barred by the doctrine of equitable estoppel, as plaintiff justifiably relied upon defendants conduct and changed its position so that it would suffer injury if defendant were allowed to repudiate the conduct. Defendant performed under the Subcontract for five months, accepted substantial payments from plaintiff, and remained silent about the non-receipt of the Subcontract after the deadline had passed. The Court reasoned that defendant knew or should have known that plaintiff would rely upon its continuing silence by failing to remedy the misdelivery and would refrain from taking timely steps to replace defendant as subcontractor. Additionally, the Court held that the plaintiff’s email was not a contractual notice of termination, as the email was not “an unequivocal, definite, and final expression of the plaintiff’s intention not to perform its obligations.”
The court concluded that plaintiff had established its claim that defendant breached the Subcontract, and is entitled to a judgment as to liability on its complaint. Defendant’s counterclaims were dismissed.
Turner Constr. Co. v US Framing Inc., Index No. A00193/2013, 11/06/15, (Platkin, J.).