Contracts II, Pages 828–832

Questar Builders, Inc. v. CB Flooring, LLC

Maryland Court of Appeals, 2009

Facts:

The parties entered into a contract for plaintiff to install carpeting in a project defendant was building. Defendant exercised the termination clauses therein, claiming that it was terminating for cause but that it had a right to terminate "for convenience" as well.

Procedural History:

Trial court concluded that plaintiff did not breach the contract and that defendant's termination "for convenience" was improper. The trial judge rejected defendant's assertion that its subjective loss of faith in plaintiff's ability to perform provided sufficient justification for exercising its termination right.

Defendant's Argument:

Trial judge did not make a finding of bad faith, but the facts that she found facts effectively consistent were bad were erroneous.

Rule:

LexisNexis IconWestLaw LogoGoogle Scholar LogoPages 829–830While acting in good faith, one cannot prevent the other party from enjoying their fruits of the contract, terminate the contract to get a better price or other missed opportunity, or exercise discretion in discordance with the "reasonable expectations" of the other party.

Reasoning:

  • While several things found would contribute to a finding of bad faith, such as defendant discussing installing the carpets with a competitor to plaintiff, plaintiff not jeopardizing its timely performance, and defendant not communicating its asserted belief that plaintiff was taking too long to plaintiff. However, it is not clear what ultimate standard the trial court used.

    If defendant's termination was not commercially reasonable and therefore inconsistent with plaintiff's reasonable expectations, if defendant sought to get a better deal with another company, if defendant did not make reasonable efforts to ensure that its contractual relationship with plaintiff remained convenient, or if defendant terminated the agreement to evade its obligation to perform, plaintiff may prevail.

  • The trial judge did not consider:

    • The significance of plaintiff trying to withhold 10% of the costs of the carpeting
    • Whether the initial bid actually changed
    • Whether defendant included included a provision in its draft contract with the replacement for plaintiff to install carpet before it terminated the subcontract with plaintiff
    • The reasonableness of defendant's assertions that plaintiff was delaying its ordering of materials
    • The length of time that passed before plaintiff responded and the commercial reasonableness under the circumstances
    • Whether plaintiff's error in not factoring in border carpeting in its initla bid played a reasonable rule in defendant's decision and whether plaintiff tried to shift this cost to defendant
    • Whether defendant paid plaintiff's replacement the same amount.

Holding:

LexisNexis IconWestLaw LogoGoogle Scholar LogoPage 829

[T]he trial judge concluded properly that Questar's subjective belief (or "gut feeling") was sufficient to trigger application of the convenience termination clause; however, . . . the trial judge did not render an express or implied finding on the ultimate fact of whether the general contractor acted in bad faith by terminating the Subcontract, although she made several findings of fact that could be viewed as contributory to reaching such a finding.

Judgment:

Judgment vacated; case remanded for further proceedings consistent with this opinion; costs to abide the result.

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