Construction law Update: Recent Appellate Division decision serves as a warning to contractors, the Contract trumps all

Published On: August 22nd, 2015

Dipizio Construction Co., Inc. v. Erie Canal Harbor Development Corp., CA 13-02032, NYLJ 1202669507319, at *1 (4th Dept., 8/8/14)

General Contractor (GC) and Owner (O) enter into a contract in which GC agrees to provide certain construction services for a "revitalization project." The contract requires GC to dispose of contaminated material at a "DEC approved lined landfill." As part of the bidding process, GC exchanges correspondence with O confirming that its bid was based, in part, on the ability to dispose of contaminated materials at a DEC approved facility rather than landfill. GC is awarded the contract and commences work. GC next submits its material handling plan (MHP) which identifies a DEC approved facility, as opposed to landfill, for the soil disposal. This apparently represents a tremendous cost savings. Notwithstanding the previous correspondence, O rejects the plan as it does not comply with the contractual "landfill" requirement. GC sues for breach of contract, pointing to the earlier exchange of correspondence as proof that O consented to the substitution.

The outcome? This appellate court held that the correspondence between the GC and O, which predated the contract, was "extrinsic evidence" and "not part of the Contract Documents." As a result, it was not admissible to prove that O has agreed to the substitution. The lesson? Never rely upon pre-contractual oral or written communications, assurances, agreements, etc. Instead, insist that the agreement is memorialized in the contract itself or included as a "contract document." If the latter, further make sure that appropriate language is used such that the terms of the additional document control over conflicting terms in the main contract.