Thursday, January 22, 2015

Case Summary: U.W. Marx, Inc. v. KoKo Contr. Inc. (conditions precedent in construction contract)

The Appellate Court affirmed the holding of the lower court, finding in favor of Koko Contracting, Inc.  U.W. Marx, Inc. was the general contractor on a construction project and entered into a subcontract with Koko for roofing work.  Marx failed to pay Koko for 3 consecutive months, wherein Koko, on October 31, 2007, ceased performance on the roof.  Marx gave Koko 3 days’ notice to cure its alleged default (failing to provide workers) wherein, on November 6, 2007, Koko provided Marx with the 7 days’ notice of its suspension of work based on nonpayment as called for in a section of the subcontract.

Marx argued that Koko should be precluded from recovery due to its non-compliance with the provision in its subcontract (a standard provision clause drafted by the American Institute of Architects) which required 7 days’ notice to be given prior to ceasing performance of the contract.  The Court held that Marx’s material breach, i.e. non-payment, was an “uncured failure of performance,” and therefore Koko was relieved from its remaining obligations under the contract.  Essentially, Marx’s material breach excused Koko from any of its own obligations set forth by the contract.  Furthermore, the Court explained that such a provision is not meaningless, as it is there to protect the subcontractor and to compensate it in the event it has to stop work for lack of payment and then remobilize. 

Decided 1/21/15 at App. Div. 2d Dept.

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