Contracts II, Pages 904–911

Roberts Contracting Co. v. Valentine-Wooten Road Public Facility Bd.

Court of Appeals of Arkansas, 2009
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Facts:

Plaintiff agreed to build a sewer system for defendant, but ended over a year behind schedule and never fully completed construction. However, plaintiff received one or two extensions and defendant took nine months over the deadline to negotiate all the easements needed for some of the equipment. Because of the non-completion, plaintiff refused to pay defendant the $104,408.30 of his final payment and $57,532.50 that plaintiff earned in addition.

Defendant claimed anything remaining was outside the scope of their contract and and that its ability to perform had been hampered by defendant's delay in negotiating the easements. Upon inspection, defendant discovered defects and debris in the sewer system, although plaintiff claimed that the problems had developed in the year after completion. Plaintiff then sued for breach of contract seeking $162,502.80.

Procedural History:

The trial court found that:

  • Plaintiff had not substantially completed the project
  • The sewer system was not operational
  • Defendant had not received any benefit
  • Plaintiff would not suffer forfeiture

The court noted that the pumping stations had not been tested because they had no electricity which plaintiff was required to provide, along with the SCADA system and as-built drawings. However it noted that plaintiff could have substantially complied without the as-built drawings.

For these reasons, the court denied plaintiff's request for damages, directed plaintiff to provide the SCADA system within 90 days to receive the contract price, and ordered it to provide defendant with as-built drawings.

Issue:

Did plaintiff substantially perform the contract?

Plaintiff's Argument:

Plaintiff substantially performed. Defendant received benefit, plaintiff was not required to arrange for permanent power for the pump stations, and defendant was required to obtain all land rights before plaintiff started work—defendant's failure to do so caused at least part of plaintiff's delay.

Defendant's Argument:

Plaintiff failed to:

  • Install a working SCADA system for each pump station
  • Adequately test its work
  • Complete the sewer system so that it could be accepted by the City of Jacksonville
  • Submit "as-built" drawings after completing the system

Rule:

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In determining whether performance is substantial, the following considerations are significant:

  1. the extent to which the injured party will be deprived of the benefit that he reasonably expected;
  2. the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;
  3. the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
  4. the likelihood that the party failing to perform or offer to perform will cure his failure, taking account of all the circumstances, including any reasonable assurances; and
  5. the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

Reasoning:

The contract was ambiguous as to who was required to provide permanent power. The parties' course of performance demonstrated that they intended to be equally responsible for arranging for it. Plaintiff's failure to test was at least partially excused by defendant's delay. Plaintiff's failure to provide power was not a material breach.

It was undisputed that the SCADA system was not essential to the sewer system's operation. It allowed electronic monitoring, but the system could still be monitored manually. The commission of the SCADA system was not a material breach then.

Plaintiff was only responsible for delivering the as-built drawings, not making them. Plaintiff's failure here was also not a material breach.

However, defendant still did not have a functional sewer system when plaintiff quit. The actual usefulness of the result is major consideration in determining substantial performance. Here, a working sewer system was the essence of the contract.

In addition, while defendant did not cooperate in obtaining permanent power, plaintiff completely quit the project. There was no chance that plaintiff would have cured his failure.

Plaintiff was paid $1.8 million. The amount left unpaid was a small portion of the payment, so it was unlikely to cause plaintiff's forfeiture.

Judgment:

Affirmed.