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

Background

A subcontractor had the main concrete and related work on a new federal post office and court building in San Juan, and a general contractor was the government’s prime contractor. The subcontract called for monthly progress payments and included an option for the subcontractor to set granite blocks sent from the United States. After a foundation settlement the government superintendent ordered work stopped. The subcontractor’s payment requisitions, including a March 9, 1912 claim, went unpaid. More than two months later the subcontractor gave written notice on May 22, 1912 terminating the contract and sued for breach and for the value of labor and materials left on the job. A jury sided with the subcontractor, the Court of Appeals reversed, and the Supreme Court reviewed the appeal.

Reasoning

The core question was whether a prolonged, indefinite stoppage and substantial nonpayment justified the subcontractor in ending the job and recovering damages. The Court found the appeals court erred on several points. It held the subcontract’s clause requiring the general contractor to furnish a suitable foundation and avoid delays could support termination when the suspension was total and without reasonable prospect of resumption. The Court also found the March 9 requisition could rest on an agreed unit price and that the granite option did not create a separate, separate contract barring payment. Evidence that tools and materials left on site were taken or retained could be counted in the subcontractor’s recovery. Finally, the Court found no reversible error in the damages instruction because no timely, specific exception was made.

Real world impact

The decision affirms that on long construction projects a subcontractor may end work and recover for labor, materials, and reasonable profits when faced with an indefinite stoppage and substantial nonpayment, and that materials left on site may be treated as part of damages.