U.S. District Court In Pennsylvania Holds Extra Work Claims Barred By Releases Submitted With Periodic Payment Requests And By Noncompliance With Requirements For Submission Of Documentation For Extra Work Claims

First Gen. Constr. Corp., Inc. v. Kasco Constr. Co., Inc.
2011 U.S. Dist. LEXIS 55349 (E.D. Pa. May 24, 2011)

Kasco was the general contractor for a shopping center expansion. Kasco subcontracted the concrete work to First General. The subcontract included a term requiring First General to submit, upon request, releases of liens, with its payment applications. The Contract also required written approval of extra work, timely written notice of claims within ten days of their occurrence, and the submission of written backup information.

First General sued to recover payment for extra work which it alleged Kasco orally directed it to perform. Kasco filed a motion for summary judgment in which it argued that: 1) written releases executed by First General barred most of First General’s claims for payment for additional work; and 2) that First General’s claims for payment for extra work postdating the last release were barred by the Contract because a) First General did not obtain Kasco’s written authorization for extra work, b) First General failed to provide Kasco with the required written notice, and c) First General did not provide sufficient backup information for its claims.

The Court held that the written releases executed by First General during the Project were enforceable and thus First General could not collect on any claims for payment for extra work which accrued before the effective date of the last executed release. The releases as signed provided that First General released Kasco from both liens and claims. They also provided that First General intended to be legally bound and were witnessed by a notary. The Court rejected the argument that a lack of consideration for the releases rendered them unenforceable. The Court held that Pennsylvania law does not require additional consideration for a release called for by the terms of a contract. The Court also rejected First General’s argument that the subcontract release requirements only applied to liens and not to claims. The Court explained that the Contract referred to the releases, which in turn referred to both liens and claims. Further, because the releases expressly evinced First General’s intention to be legally bound and were notarized, additional consideration was not required to support their enforceability under the Pennsylvania Uniform Written Obligations Act.

The court acknowledged that written change order requirements may be waived where a party orally requests extra work and promises to pay, and that time of notice requirements may be waived where a party suffers no prejudice as a consequence of delay, and that there were issues of fact as to such issues. However, it held that the subcontractor’s failure to submit the back up documentation required by contract to support its extra work claims did prejudice the prime contractor. For this reason, it held that such extra work claims as were not barred by release were barred by reason of subcontractor’s failure to submit the documentation required by the subcontract.

Click here for full text of case courtesy of LexisNexis.

Lindsay J. Levine

This entry was posted in Subcontract and tagged , , , , . Bookmark the permalink.