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Email Exchange Forged Exclusive Subcontract, Without Signature

Wednesday, August 30, 2017 05:23 am


Contract Breach

Pacific Commercial Services, LLC v. LVI Environmental Services, Inc., 2017 U.S. Dist. Lexis 98614 (D. Haw. June 26, 2017)

A contractor breached a subcontract when it assigned work to a replacement company without first invoking a termination clause to release the original subcontractor from the project.

LVI Environmental Services, Inc. (LVI) hired Pacific Commercial Services, LLC (PCS) as a waste removal subcontractor on a project to deactivate a Honolulu Electric Company (HECO) power plant. PCS began work in early 2012, prior to finalizing a subcontract. In total, LVI paid the sub $526,376 for its services on the project. However, in January 2013, LVI began to use other companies for waste transportation and disposal services. PCS sued LVI for contract breach.

LVI first argued that it couldn’t have breached the subcontract because the parties did not have a valid agreement. It pointed to the fact that PCS never signed the subcontract. However, "parties may become bound by the terms of a contract, even though they do not sign it, where their assent is otherwise indicated." Credit Assocs. of Maui, Ltd. v. Carlbom, 98 Haw. 462, 50 P.3d 437 (Haw. Ct. App. 2002). Here, the subcontract documents were contained in a series of emails exchanged by the parties in March and April 2012:

LVI emailed PCS a "Subcontract/Purchase Order" that included the parties’ names, scope of work, project location, price, and both indemnification and termination provisions. The proposal also provided that "Subcontractor agrees to be bound to Contractor by the terms of the Agreement for this project."

PCS replied by suggesting several modifications, and LVI responded with proposed revisions. LVI wrote: "Let me know if these are acceptable to PCS and we will get this out to you." PCS answered: "We accept what you proposed below. Please revise it and send it to me for signature" (emphasis added). LVI then sent the revised subcontract to PCS.

The court ruled that this email exchange "demonstrate[d] a proposal of a contract, bargained-for revisions to the contract, a meeting of the minds on all [...]

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