By: Alexander A. Miuccio Gregory J. Spaun Published: July 2018

Court Rejects Contractor's Motion to Dismiss Sub's Claim

Construction contracts often provide for a condition precedent to the right of a subcontractor to commence a legal action against a general contractor. An example of a condition precedent is the requirement of a subcontractor to give timely notice of a claim to its general contractor prior to the subcontractor’s right to commence a lawsuit for non-payment for work performed.

In the recent case of Walsh Electrical Contracting, Inc. v Aurora Contractors, Inc., the court ruled on a general contractor’s motion to dismiss a subcontractor’s action to recover monies claimed to be due because of the subcontractor’s alleged failure to comply with two condition precedent clauses in the subcontract.

Background

Aurora Contractors entered into a contract for the construction of a FedEx facility in Queens. Aurora, in turn, subcontracted with Walsh Electrical Contracting to perform the electrical scope of work necessary for the project. Walsh performed the work, and then claimed that it was not fully paid for its work.

Walsh’s subcontract provided that notice of any claim by the subcontractor for damages, extra or additional compensation, or an extension of time had to be provided to Aurora within five days of the time that the claim accrued, and that such notice had to provide specific details about the claim or else such claim would be waived and Walsh shall have no right to recover upon it. The subcontract also set forth a dispute resolution procedure which provided that any claims “may be mediated by the parties” in accordance with the Construction Industry Rules of the American Arbitration Association.

Walsh ultimately commenced suit against Aurora based on Aurora’s failure to remit full payment on Walsh’s invoices. Aurora moved to dismiss the lawsuit, arguing that Walsh failed to comply with the subcontract’s notice of claim requirement, and that Walsh also failed to participate in mandatory mediation before commencing litigation.

Decision

The court denied Aurora’s motion, finding that the provisions relied upon by Aurora were not conditions precedent to Walsh’s commencement of its lawsuit. In doing so, the court followed well settled case law that a contract should be interpreted and applied as written by the parties, and that courts will not rewrite a contract after the fact. Here, the court found that the notice of claim provision only applied to claims for damages, extra or additional compensation, or extensions of time, and that a claim for failing to pay invoices submitted by Walsh was not encompassed within the notice of claim provision.

As for the issue of mandatory mediation, the court found that the mediation provision used the word “may” in describing the mediation process, and that such word showed that mediation was optional, rather than mandatory. Accordingly, the court held that the two contractual provisions were not conditions precedent to Walsh’s commencement of an action to recover monies for its work on the project.

Comment

It is a long-standing rule of law that a court’s function is to interpret and apply the contract, as written by the parties. A court will not rewrite or remake a contract after the fact. Contracting parties should ensure that essential terms of a contract are drafted with clarity and precision to reflect the true intentions of the parties so that contingencies that may arise will be covered and dealt with in accordance with the parties’ intentions at the time of contract. 

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