Guerini Stone Co. v. P. J. Carlin Construction Co.

Background

A Massachusetts stone company acquired a subcontract from Guerini to set granite and construct concrete walls and floors for a new post office and court building in San Juan, Porto Rico. The defendant was a New York general contractor who held the prime contract with the United States. Work was slow: foundations were changed by the Government, granite shipments arrived late or mismatched, and the building was ordered stopped by the Government on March 9, 1912. The subcontractor stopped work, terminated the contract on May 22, 1912, and sued for about $45,797 in damages, claiming withheld payments, expenses, lost profits, and value of tools left on the job. A jury awarded $6,609.25, including $3,000 for tools, and the trial judge had admitted the government’s prime contract into evidence and instructed the jury that government-caused delays relieved the defendant of liability.

Reasoning

The Court held that the prime government contract was not automatically part of the subcontract and could not be used to absolve the general contractor except to show which drawings and specifications were referred to. The Court found the trial judge erred in reading the prime contract’s suspension clauses into the subcontract and in ruling that delays by the Government barred money damages. Paragraph 11 of the subcontract required the general contractor to provide labor and materials not included in the subcontract “in such manner as not to delay” the subcontractor, and could require reimbursement for losses. The Court also found it was error to exclude reasonable evidence of the subcontractor’s probable profits.

Real world impact

The decision sends the case back for further proceedings consistent with these rulings so the subcontractor’s money claims, including profits and losses from suspended work and withheld payments, can be reconsidered by the trial court.