Questions of Fact Preclude Summary Judgment on Claim for Deletion of Work in Construction Contract

On December 28, 2018, Justice Bransten of the New York County Commercial Division issued a decision in Graciano Corp. v. Lanmark Group, Inc., 2018 NY Slip Op. 33388(U), holding that questions of fact precluded summary judgment on a claim for deletion of work from a construction contract, explaining:

Graciano argues that it was justified in stopping work on the Project because Lanmark delayed and interfered with Graciano's work on the Project, and wrongfully deleted a substantial portion of the masonry work from the Subcontract. Graciano blames the delays on events unrelated to the scaffolding, such as installation of steel by another subcontractor, change orders, and delayed responses to requests for information needed to process submittals and shop drawings, and seeks more than $900,000.00 for, among other things, increased costs.

In opposition, and in support of its motion for summary judgment, Lanmark argues that Article 8.1 of the Subcontract expressly permits it to delete a portion of the work to be performed by Graciano, and that Graciano materially breached the Subcontract by abandoning the Project in response to the deletions outlined in Addendum No. 3. Lanmark also asserts that Graciano's breach of the Subcontract precludes it from recovering damages, and warrants dismissal of the Complaint. Lanmark further maintains that it is not responsible for Graciano's increased costs, especially since the scope of the work contemplated by the Subcontract was unchanged and the means and methods of completing the work was solely Graciano's responsibility.

It is beyond dispute that clauses in a construction contract that permit the deletion of work are commonplace and enforceable. However, courts have generally construed such clauses to permit deletions in contracts so long as they do not alter the essential identity of the main purpose of the contract. Enforcement of an omission clause also requires a finding that defendant's actions in omitting portions of the contract were not arbitrary or capricious.

Here, as stated, the purpose of the Subcontract was "complete masonry installation." At the very least, a question of fact exists as to whether Addendum No. 3, which, among other things, deleted the remaining masonry work, eliminated substantial and material portions of the work contracted for, and had the effect of altering the essential identity and main purpose of the Subcontract. As such, Lanmark has not established as a matter of law that Graciano breached the Subcontract by stopping work on the Project after receiving Addendum No. 3, which deleted a majority of the work contemplated by the Subcontract. Furthermore, the numerous disputes between Graciano and Lanmark about events of delay and who caused those delays also raise triable issued of fact regarding the claims for breach of contract. Thus, the branches of Defendants' and Plaintiffs motions for summary judgment on their breach of contract claims must be denied.

(Internal quotations and citations omitted) (emphasis added).

One of the reasons parties often choose to have their contracts governed by New York law is that New York courts generally enforce agreements as written. However, as this decision shows, in rare circumstances, the courts will look beyond the contract to put the parties' actions in context. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure how to enforce rights you believe you have under a contract.