The Law

Goof Won’t Amount to Much by Lynda Gutierrez Is an error in construction of a shopping center grounds for withholding payment from the general contractor? Not if the error proves harmless and unintentional, a New York court has ruled. The shopping center in that case is located in Watertown, and the construction error occurred during erection of the foundation walls for a Sam’s Wholesale Club store. With construction nearly 75 percent completed, at a cost of more than $300,000, the developers learned that a subcontractor had failed to properly install the required wall reinforcement. Instead of installing the reinforcement on every course of below-grade masonry block, the subcontractor had installed it on every other course of the masonry block. Based on standard building practice, however, the subcontractor had done no wrong. Moreover, the difference in cost between the two applications amounted to only $619. But the contract specifications required reinforcement on every course. So the developers of the shopping center refused to pay the general contractor unless he rebuilt the foundation wall (at an estimated cost exceeding $500,000). They contended that the foundation wall error was intentional and deliberately overlooked by the contractor. The contractor sued, charging that the developers wrongfully ordered him to rebuild the foundation and asking the courts to require the developers to pay for work completed on the project. A New York State appellate court sided with the general contractor, explaining, “The contractual requirement that the wall reinforcement be installed on every course of below-grade masonry block did not accord with the standard building practice in the area, and the savings to the subcontractor resulting from the omission were minimal. Even the company hired [by the developers] to inspect the masonry work failed to notice the omission. Nor is there any evidence supporting the contention that the general contractor deliberately overlooked the contract specifications while observing the construction of the foundation. The contractor’s inadvertent failure to notice the omission may be traced to the unusual nature of the contract specification, which was meaningless in terms of the integrity of the foundation.” (Edgewater Construction Co., Inc. v. 81 & 3 of Watertown, Inc., 769 N.Y.S. 2d 343) Decision: December 2003 Published: February 2003