In Sato Construction Co. v. 17 and 24 Corporation the owner of the project hired the contractor to restore several windows of a building that had been designated as historical landmarks. After the restoration work began the architect sent a letter to the corporation advising that due to the severely deteriorated condition of the windows, restoration was not possible. The owner then terminated the contract with the contractor pursuant to a contractual provision that allowed the owner to terminate the agreement "upon certification by the architect that sufficient causes exists to justify such an action." After the contractor sued for breach of contract, the owner filed a motion to dismiss claiming that the architect's finding of impossibility conclusively justified termination. In disagreeing and denying the motion, the Court found that
"while the architects may have made a factual determination that the job for which [the contractor] had been retained was impossible to complete, such determination does not, as alleged by the [owner], conclusively establish impossibility of performance or that reasonable cause to terminate the contract existed."
The lesson for owners and developers is that regardless of what the contract says, or what the architect tells you, you may still have to prove that a contractor was properly terminated. Owners cannot simply rely upon the statements of the architect in terminating the contract (although of course if it is later established that the termination was justified then the reliance on the architect can ultimately be proper).
Vincent T. Pallaci is a partner in the New York law firm of Kushnick Pallaci, PLLC. His practice focuses primarily on the areas of construction law. He can be reached at firstname.lastname@example.org or (631) 752-7100. You can also visit our firm site at www.nyconstructionlaw.com