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NO CONTRACTOR FRAUD WHERE CONTRACT ALLOWED FOR MAJOR WORK SCOPE REDUCTIONS

Tuesday, October 23, 2012 05:11 am

 

Fraud

Road and Highway Builders, LLC v. Northern Nevada Rebar, Inc., 2012 Nev. Sup. Ct. Lexis 81 (Aug. 9, 2012)

If you're pricing based on volume, beware contracts where the total price for your work isn't fixed but unit prices are. The Nevada Supreme Court has ruled that a contractor was not guilty of fraud where it significantly reduced a subcontractor's scope of work by hiring an alternate sub.

Road and Highway Builders, LLC (Builders) was the general contractor on a Nevada Department of Transportation (NDOT) project to build a 2.3-mile portion of freeway. The project required 2.7 million pounds of reinforcing steel, or rebar. Builders executed a subcontract with Northern Nevada Rebar, Inc. (NNR) under which NNR agreed to furnish all labor and materials necessary to fully perform the rebar work. After it began delivering rebar, NNR discovered that Builders had substituted a substantial portion of the rebar with material supplied and installed by another sub.

Builders rejected NNR's request for an equitable adjustment of the unit price for rebar, stating that it had the right to make changes. Builders eventually sued NNR for contract breach after NNR employees failed to show up on the job site, and NNR counterclaimed with an a [...]

 
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