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Subcontractor's Non-compliant But Substantial Performance Excuses Contract Breach

Monday, August 04, 2008 03:24 pm

Subcontractor's Non-compliant But Substantial Performance Excuses Contract Breach

A contractor lost out by attempting to use one payment of undisputed funds as leverage to get a subcontractor to release its claim to a second disputed payment.

When Americon Services Company, Inc. (Americon) did not receive its expected payment from ARCOConstruction Company, Inc. (ARCO) for work it completed on a Houston, Texas warehouse construction project, it sued the contractor. A jury found that ARCO violated the Texas Prompt Payment Act by failing to pay the subcontractor in a timely manner and awarded Americon $61,000. The court also excused Americon for its own contract breach, and ARCO appealed, seeking damages.

The subcontract required Americon to indemnify ARCO and the owner, TMT Properties (TMT), against liability for claims and liens for labor and supplies, including any costs, attorney's fees and damages. This requirement took center stage when disgruntled subcontractors missing payment from Americon took things out on ARCO.

Subcontractor fails to honor indemnification duty

Americon had hired C.M. Nunez Trucking Company (Nunez) to haul dirt for $72,000. Nunez hired Mulch Matters (Mulch) to supply that dirt for $53,000. When Americon paid Nunez just $56,000 for the hauling (it withheld $16,000 that Nunez allegedly owed Americon for another unrelated project), Nunez f [...]

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