By: Alexander A. Miuccio Published: October 2011

Court Rejects Claim for Loss of Profitability

In a recent New York Court of Claims case, Liddell v. The State of New York, a contractor made a novel claim for breach of contract. The contractor sought compensation based on the unanticipated increase in the cost of materials. Notably, the claim to recover the increase in the cost of materials was not caused by any delay by the State in the completion of the project.

Background 

Liddell Brothers, Inc. contracted with the State of New York to upgrade the Intelligent Transportation System on the Northern State Parkway in Nassau and Suffolk Counties. Part of the contractor's work included the installation of copper cable. Between the contract signing and the contractor's purchase of the copper cable, the cost of copper materials increased. The contractor claimed that the price increase was unanticipated and requested additional compensation from the State. The State denied the request on the grounds that it was not contractually or statutorily required to pay the contractor for the increased cost of the copper cable. The State's representatives also noted that under the contract, the contractor was entitled to purchase and stockpile the copper cable once the contract was signed, and invoice the State for the materials purchased, which the contractor did not do.

After the contractor's request for additional compensation was denied, the contractor sued the State. The State moved for summary judgment, dismissing the contractor's claims.

Decision

The court ruled in favor of the State, granting summary judgment and dismissing the contractor's claims. The Court based its decision on the plain terms of the parties' contract. Although the parties' contract included provisions for an increase in the cost of steel, iron, asphalt and fuel, it did not include any provision for increases in the cost of copper. Additionally, the court noted that the contract provision addressing unanticipated price increases related to delays caused by the State. This was not a delay claim. Here, the contractor acknowledged that there were no delays caused by the State, so the contract provision that the contractor was attempting to rely upon was inapplicable.

According to the court, "the mere fact that a contract becomes economically unprofitable is insufficient reason to relieve a contracting party from its contractual obligations." Further, the court stated "there is no moral obligation to give public money to disappointed contractors." Based on the plain terms of the parties' contract, the court dismissed the contractor's claims.

Comment

With limited exceptions, courts will enforce contract terms that are clear and unambiguous. Here, there was simply no contractual basis for the State to provide the contractor additional compensation for the increased cost of copper cable. Nor would the contractor have been required to provide the State a refund if the cost of copper had gone down. The court system does not exist to rewrite the terms of the parties' contract. Courts will not substitute for an agreement reached by two parties the court's view of what the agreement should have been. The court's role is to interpret and enforce the agreed-upon terms. Contractors should keep this in mind when negotiating a contract and performing their work.

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