DC Court Holds that Authority’s Consideration Of Contractor’s Claim on Merits Raises Issue of Fact as to Waiver of Late Notice Defense

TRG Construction, Inc. v. District of Columbia Water & Sewer Authority
2013 D.C. App. LEXIS 257 (May 9, 2013)

Appellant, TRG Construction, Inc. (“TRG”), was hired by the District of Columbia Water and Sewer Authority (“D.C. Water”) to renovate bathrooms at D.C. Water’s central operations facility. When TRG initially contracted with D.C. Water it agreed to complete the bathroom renovations by June 13, 2004. The project suffered delays, however, and the deadline for completion was extended to July 31, 2005. Before that deadline, TRG requested another extension. D.C. Water declined to grant the request. Shortly thereafter, D.C. Water sent TRG a cure notice detailing several alleged deficiencies in TRG’s work. TRG declined to fix the problems asserting that its work was not defective. On September 2, 2005, D.C. Water terminated TRG’s contract for convenience.

TRG filed a lawsuit in the District of Columbia Superior Court seeking, inter alia, compensation for the termination for convenience and delay damages. With respect to the termination for convenience, TRG asserted that it was entitled to payment of its last two invoices, the cost of increasing its bond premiums, the cost of materials purchased and left with D.C. Water and anticipatory profits. For its part, D.C. Water argued that it had properly withheld TRG’s termination for convenience payment because it had claims against TRG for deficient work. With respect to TRG’s claim for delay damages, D.C. Water asserted that the TRG delay claim, submitted a year after the termination, was precluded because the contract required that such claims be submitted 30 days from their occurrence. D.C. Water successfully moved for summary judgment on these grounds and TRG appealed.

First, with respect to TRG’s claim for termination for convenience damages, the D.C. Court of Appeals reviewed federal court decisions on deducting the costs of deficient work from termination for convenience compensation. The Court determined that D.C. water was not entitled to deduct the cost associated with correcting the terminated portion of the work or obtaining a replacement contractor, but could deduct for proper back charges against the un-terminated portion of the work. With the record undeveloped on the precise nature of D.C. Water’s claims, the Court remanded for the trial court to make a determination as to whether D.C. Water’s permissible claims were greater than TRG would otherwise be entitled to under the termination for convenience provision of the contract.

Second, with respect to TRG’s claim for delay damages, TRG argued that D.C. Water waived the provision requiring that TRG submit claims within 30 days of its occurrence by denying TRG’s claim on the merits without raising the issue of untimeliness. The Court disagreed with the trial court’s conclusion that TRG’s failure to comply with the 30 day window for claims was an absolute bar to TRG’s recovery where TRG asserted that D.C. Water waived the requirement. Accordingly, the Court remanded the case for a determination as to whether D.C. Water’s actions constituted a waiver of the time limit for submission of claims articulated in the contract.

Joseph T. Imperiale

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