A Cautionary Tale for All Subcontractors

The Connecticut Appellate Court recently handed down a decision that should have all subcontractors carefully reviewing their subcontracts.  In Suntech of Connecticut, Inc. v. Lawrence Brunoli, Inc., 143 Conn. App. 581 (2013), Suntech of Connecticut, Inc. (“Suntech”) agreed to “provide glass doors, glass, glazing, an aluminum framing system, and a metal framing system” as a subcontractor on a state project.  Id.  As a result of an error in the plans and specifications, Suntech incurred substantial additional costs. Typically, when an error in the plans and specifications results in a contractor incurring additional costs, the contractor is entitled to a change order but that is not what occurred in this case.

The Suntech decision appears to go against two principles of Connecticut construction law.  First, in Southern New England Contracting Co. v. State, 165 Conn. 644, the Connecticut Supreme Court issued a decision consistent with the Spearin doctrine which states that, because the contractor agrees to build the project in accordance with the plans and specifications, the contractor will not be held responsible for damages should the plans and specifications end up being defective.  Second, while not conclusively determined, it is generally believed that, in Connecticut, “pay when paid” clauses do not pass the risk of an owner’s nonpayment onto subcontractors and, instead, merely set a time for payment.  Both principles were discussed in the Suntech decision and should have resulted in Suntech prevailing in its claims against the general contractor but the trial court and the Appellate Court took a different approach.

The State of Connecticut does not allow subcontractors on state projects to assert what are known as pass through claims.  A pass through claim is a claim brought by a subcontractor on grounds that should make the owner liable for any additional costs – such as a claim based upon defective plans and specifications.  In Connecticut, the state will only consider such claims if the general contractor accepts liability for such claims to its subcontractor and then asserts the claim against the state as its own.  The question then becomes whether the subcontractor may assert such a claim against the general contractor if the claim is denied by the state.  According to the Suntech decision, the answer is no.

The Appellate Court in Suntech heavily relied upon the subcontract language.  In the subcontract between Suntech and the general contractor, Suntech agreed to allow the state’s engineer to have the final decision with regard to all claims.  When the state denied the claim due to defective plans and specifications, that decision was then binding upon the general contractor and Suntech.

I expect that the Suntech decision may be asserted for the proposition that an owner or general contractor is not responsible to a subcontractor for defective plans and specifications or that a subcontractor assumes the risk of owner’s nonpayment under a pay when paid clause but that would be a substantial overreach.  The Suntech decision should be limited to its facts and held applicable only to cases involving a public owner and a subcontract that expressly makes the public owner the sole arbiter of the subcontractor’s claims.

Subcontractors need to review any proposed subcontracts very carefully to avoid the Suntech trap.

If you need a subcontract reviewed, require assistance obtaining damages for claims arising out of defective plans and specifications, or are simply being denied payment, please give me a call.

Scott Orenstein
(860) 760-3317

 

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