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Despite Defective Drawings, 'Vendor' Was Entitled To Payment

Monday, May 01, 2017 05:30 am

 

Contractor---Contract Termination

ETI, Inc. v. Buck Steel, Inc., 2017 La. App. Lexis 128 (4th Cir. Feb. 1, 2017)

What appeared to be a typical construction contracting dispute between a general and a sub turned out to be a "sales contract" dispute with a "vendor" who was entitled to the payments made to it even though its performance was noncompliant.

ETI, Inc. (ETI) was the general contractor on a State of Louisiana construction project at the University of New Orleans North Campus. ETI hired Buck Steel, Inc. (Buck Steel) to perform tasks related to construction of a metal building system. Specifically, the ETI-Buck Steel agreement required Buck Steel to prepare shop drawings to be approved by the project engineer and architect. Both Buck Steel's first and second attempts were rejected because the drawings it submitted failed to comply with the project plans and specs. ETI terminated the parties' contract and then sought recovery of the deposit payment made to Buck Steel ($45,629), as well as delay damages ($70,800), additional overhead ($141,012), costs to hire a replacement contractor ($21,155), and other equitable relief.

For its part, Buck Steel alleged that ETI breached the agreement when it "unilaterally ... rescinded ... and canceled" it. Buck Steel sought liquidated damages in the amount of 33 percent of the contract price plus attorney's fees and other costs.

A trial court concluded that ETI "carried its burden of proving breach of contract" based on Buck Steel's failure to provide acceptable drawings, and it awarded ETI $46,194.32. However, the court also ruled that Buck Steel was entitled to keep the $45,629 deposit from ETI. Thus, all ETI would get was the difference of the two amounts: $565.32 in damages. (The trial court also ruled that ETI failed to show Buck Steel's failure was the sole cause of project delays.)

Vendor v. contractor

On appeal, ETI alleged that the trial court improperly ruled that Buck Steel was a vendor and not a contractor. This point was important because if Buck Steel acted as a contractor without a Louisiana license, its "Contract for over $50,000, which included erecting the steel building, was absolutely null," ETI argued. (Louisiana Revised Statutes 37:2150.1(4)(a) defines a "contractor" as a person who undertakes or submits a bid to construct or take charge of the construction of any building, road, excavation, public utility structure, etc. for which the entire cost, if the property is to be used for commercial purposes, is $50,000 or more.)

To determine Buck Steel's role, the court examined the work it was contracted to do. It found that the contract price---$87,632---pertained to "building pricing" costs (including engineered stamped drawings) only and not to the $30,000 "erecting pricing" costs that the parties had also discussed.

ETI asserted that both a pre-contract letter of intent and the signed contract contemplated that Buck Steel would provide the necessary materials and erect the building once the drawings were approved. Both documents did contain separate pricing each for building and erecting, bu[...]

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