It Was Supposed to be Done When?
Construction Law NotesIntroduction
This month, I will be reviewing a recent Illinois appellate decision discussing the duty of a subcontractor or a subsubcontractor to perform in a timely manner. If there are specific legal issues or cases, you would like to see discussed in this column, please let us know.
The Facts
In this case, the owner of the building allowed a tenant to move in before the occupancy date set in the prime contract. Unfortunately, the owner and the prime contractor did not notify the subcontractor installing exterior granite block (SC) or the subsubcontractor (SSC) responsible for installing the sealant between the granite blocks.
Approximately five months before the scheduled completion date (in the middle of the winter), the tenant began to occupy the building. Shortly after the tenant installed part of its computer system a water line along an exterior wall broke causing approximately $1,000,000.00 in damage. Needless to say, the tenant (and its insurance company) was not happy and sued everybody.
In its lawsuit, the tenant, represented by the insurance company, claimed the SC and SSC were responsible because the SSC had not sealed the granite block, which allowed the water line to freeze.
While the SC and SSC each admitted the area in question had not been sealed as of the date the line froze, they claimed they were not responsible for the following reasons.
Their contracts
did not call for them to complete the work for several months.
The owner and general contractor were aware of the defendant's progress
(or lack of progress).
They did not know any tenants were moving in early.
The SC and the SSC each filed a motion for summary judgment, which
was granted by the trial court. The tenant appealed the summary
judgment ruling, which resulted in the ruling discussed in the article.
In its appeal, the tenant offered an additional "theory" for recovery which was rejected by the Court for two reasons. First, there was no evidence in the record to support the "new" theory. Second, the Court found the "new" theory was not included in the tenant's Complaint and that it could not be added on appeal.
The Ruling
In a well written decision, the Court denied the appeal. In essence, the Court found that a subcontractor and its subcontractors are only required to perform in accordance with the terms of the contract. Since the contract did not require the work to be finished by the date in issue, the owner allowed tenants to move in at its own risk.
The Court also found that the SC and SSC were not responsible for knowing what they were not told. In this regard, the Court noted that, while there were a number of cases holding sub and subsubcontractors liable for failing to perform in a workmanlike manner, that liability does not come into being until the work is completed.
In its discussion the Court noted it was being asked to "determine if these facts impose a duty upon defendants to complete their work prior to (the tenant's) undisclosed occupancy." In finding that it could not impose such a duty the Court found that the SC cannot reasonably be expected "of its own volition, to keep abreast of every tenant's occupancy date and set its schedule accordingly."
In my opinion, one of the most interesting aspects of this case was the fact that the project architect sent a letter to the owner advising the building was suitable for tenant occupancy a month before the water line froze and six months before the required completion date. Unfortunately, the Court's decision does not explain how the architect determined the building was ready for occupancy without checking with the subcontractor installing the exterior granite blocks.
Conclusion
If you are a prime contractor, you need to ensure your subcontractors know, and agree, to any performance acceleration. You also need to ensure that your subcontractors pass that information on to their suppliers and subcontractors.
If you are a subcontractor, you need to ensure the prime is aware of your status. While you do not have a duty to complete your work early, you do have a duty to make adequate progress. In this case, one of the primary factors protecting the SC and SSC from liability was the Court's finding the prime was aware of their progress and knew the exterior work had not been completed.