subject: When Owner's Actions Speak Louder Than Words [print this page] A contractor was once unable to convince the court that the conditions of the contract were ambiguous, however it manage to show that the owner manipulated the words on the page.
Thomas & Marker Construction Company (T&M) contracted with Wal-Mart Stores, Inc. (Wal-Mart) to build a Wal-Mart Supercenter in Springfield, Ohio for an amount of $ 9.6 million. For earthwork like rock excavation that sum included an amount of $700,000. It happened so that T&M encountered rock at higher elevations than projected in the engineer's soil borings report, so the contractor submitted a preliminary change order budget (PCOB), because it was a requisite by the contract for "unforeseen conditions". The contractor removed the unforeseen rock, and incurred alleged costs of more than $1 million, and then they submitted a change order asking for their due payment. The Wal-Mart management consulted among themselves and denied the request because as per them the rock removal work T&M completed was included in the bid. At trial, Wal-Mart sought summary judgment on T&M's claims against it, including contract compliance issues and implied warranty of suitability and accuracy of plans, specifications and geotechnical reports.
Weak ambiguity argument minces words
The contract's classification of "unforeseen conditions" included "rock excavation" defined as rock that cannot be removed by "mechanical methods, and therefore, requires drilling and blasting". T&M intended to contest that the language used was ambiguous as both drilling and blasting are very much mechanical methods. However, the court explained that the definition is exclusive of certain mechanical methods and is very clear in classifying "rock excavation" as rock that is removed by drilling and blasting. In this case the contractor had not drilled or blasted the rock but simply removed it. Hence, their work was not considered as "unforeseen." Stronger waiver argument focuses on evidence
T&M struck luck arguing that Wal-Mart had deferred the contractual definition of "rock excavation", also as per the contract such work would be an unforeseen condition.
But T&M had no evidence to support the waiver in writing, therefore they pointed to four key actions on Wal-Mart's part:
(1) Earlier Wal-Mart accepted a change order for excavation of bedrock. When the order was approved it stated that the change was "required for unforeseen site conditions, have to place... concrete and backfilling with clay material due to the rock conditions in areas unexpected."(2) When T&M's PCOB highlighted inaccuracies in the soil borings report, Wal-Mart acknowledged them and instructed the contractor to keep track of its rock removal costs. (3) The PCOB for the rock excavation was approved by Wal-Mart. (4) Also, in this specific case Wal-Mart was initially debating the rock and work involved instead of rejecting the change order for rock excavation upfront. Wal-Mart contended existence of a waiver unless it was given in writing, however it was sufficient evidence for the court "from which a fact finder could conclude Wal-Mart waived certain relevant portions of the [contract] by its affirmative actions". Wal- Mart's motion for summary judgment was hence overruled by the court.
Side argument using Spearin falls flat
In this case there was also another dispute over the Spearin Doctrine. As per the contract, T&M warned not to rely much on the soil boring report as it was touted to be inaccurate and therefore told to conduct its own site investigations. The argument produced by T&M was Spearin voided those obligations. It claimed that "when information is obviously intended to be used by bidding contractors in formulating bids, the implied warranty of job site conditions will prevail over express contract clauses which disclaim any responsibility for the accuracy of the information provided to contractors and which require contractors to examine the site."However, this argument was totally futile as, in Ohio; Spearin has been applied exclusively to government contracts. It was noted by the court that no Ohio court has found reason to apply it to private contracts.
Editor's Note: An illusory differing site is involved in this case. Conditions clause as all "rock" eventually, can be removed mechanically, points out Gerard Ittig, attorney and consulting editor to this publication. It would have been a much better argument for the contractor that the rock it encountered was of a different composition from what could be expected in Ohio. But, it was solely contested on the fact that the rock appeared at a higher elevation than shown on the boring logs and required specialized mechanical machinery for removal.
