US Court of Appeals for Seventh Circuit Holds Gross Discrepancy in Bid Price Not Sufficient to Relieve Vendor of Obligation to Subcontractor

Architectural Metal Systems, Inc. v. Consolidated Systems, Inc.,
58 F.3d 1227 No 94-3898 (7th Cir. July 5, 1995)

Offer and Acceptance – Under the Illinois U.C.C., a price quotation that specifies the items to be sold, the quantity and price of each specified item, and the delivery terms is not hopelessly vague, as long as the remaining terms regarding warranty, excuses, remedies and the like can be inferred from trade usage. Promissory Estoppel and the Statute of Frauds – Under the Illinois U.C.C., while the statute of frauds is applicable to a claim of promissory estoppel, if the alleged promise is a price quotation and such term is in writing, the statute of frauds is not a bar to the claim. Discrepancy in Bids Does Not Create Presumption of Mistake – a bid that is more than 50% lower than another bid does not, as a matter of law place the buyer on notice that the low bid contains a mistake.

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District Court in New York Finds Evidence Sufficient to Support Waiver of Written Change Order Requirement and Bad Faith Exception to Enforceability of “No Damage for Delay” Clause in Subcontractor Miller Act Suit

United States of America, for the Use and Benefit of Evergreen Pipeline Construction Co., Inc. v. Me,
No. 90 Civ. 5106, 890 F. Supp. 1213, 1995 U.S. Dist. LEXIS 9385 (S.D.N.Y. July 7, 1995)

Oral Requests for Extra Work – Under New York law, either oral directions to perform extra work, or a general course of dealing may effectuate a waiver or modification of contract provisions which otherwise expressly require written authorization or notice of such extra work claims. No Damage for Delay – Under New York law, an exculpatory “no damage for delay” clause will not be enforced where the delay was: 1) not contemplated by the parties 2) caused by the contractor’s bad faith, or willful, malicious, or grossly negligent conduct; 3) so unreasonable that it constituted an intentional abandonment of the contract; or, 4) the result of a fundamental breach of the contract by the contractor. Punitive Damages – Punitive damages on purely contractual claim will not be awarded where there is insufficient evidence for a jury to conclude that public rights were implicated or that objectionable conduct was directed at the public generally. Prejudgment Interest – Subcontractor is entitled to prejudgment interest for services rendered seven years before judgment was entered. Rule 11 Sanctions – Defendants’ assertion of a civil RICO counterclaim without sufficient basis therefor warrants imposition of sanctions under Rule 11. Attorney’s fees awarded as a Rule 11 sanction is a matter committed solely to the discretion of the district court. In ascertaining “reasonable” fees, the court must bear in mind that the principrned a verdict in favor of subcontractor Evergreen and found that Merritt materially breached the subcontract and that certain provisions regarding extra work and delay damages were either waived or eliminated by the parties. Merritt filed various post trial motions challenging the jury’s verdict regarding: the oral requests for extra work under a contract which required that all such requests be in writing; the award of delay damages under a contract with an express “no damage for delay” provision; and challenging the propriety of permitting a claim for punitive damages to be submitted to the jury. Evergreen also filed various post trial motions seeking prejudgment interest and attorney’s fees incurred in defending baseless civil RICO claims.

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US District Court in Minnesota Holds that Owner Did Not Waive Right to Arbitrate Against Designer by Failing to Join it in Arbitration Against Contractor

Buhler, Inc. v. Reuter Recycling of Florida, Inc.,
889 F. Supp. 1126, 1995 U.S. Dist. LEXIS 9815 (D. Minn. Jul. 10, 1995)

Based on interpretation of two differing arbitration provisions, an owner did not waive its right to arbitrate its claim against designer of facility and seller of equipment by failing to consolidate the arbitration proceeding with the proceeding against its general contractor.

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