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Court Floats Novel Calculation Method For Lumpsum Contracts

Saturday, July 04, 2009 06:06 pm

 
Court Floats Novel Calculation Method For Lumpsum Contracts Contract Price--LumpSum Contract Sea Byte Inc. v. Hudson Marine Management Services, Inc. U.S.Court of Appeals for the Eleventh Circuit 2009 U.S.App.Lexis 8429(April 20, 2009)

Pop quiz: When a lumpsum contract terminates on its own terms, but does not specify how to calculate the value of work performed before the termination, how big a check should the owner write? New answer: It should pay out the portion of the lump sum equal to the percentage of the project's total value the contractor has performed.

In March 2004, the vessel M/V Eastwind ran aground on a coral reef off the coast of Florida.Under Florida law, the ship's owner--an association of vessel owners managed by Thomas Miller P&I Ltd.and Thomas Miller (Miami)Inc.(Miller)--was obliged to reattach the live coral heads and repair any site damage.Miller entered into a contract with Hudson Marine Management Services, Inc. (Hudson), to restore the grounding site for a lump sum of $5,200,000.The contract included a"severe weather"provision, which stated:"Should changes occur due to severe weather,[Miller],[Hudson], and the Trustees would then need to readdress the scope of the project."

A few months in, two hurricanes struck the grounding area, scattering the alreadyremoved rubble and causing new damage to the reef.Hudson asked Miller for an additional $2,100,000 to finish the project, but the parties could not agree on a price.Hudson and its subcontractor contin- [...]

 
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