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United States use of Susi Contracting Co. v. Zara Contracting Co. - 146 F.2d 606 (2d Cir. 1944)

Rule:

It is an accepted principle of contract law, often applied in the case of construction contracts, that the promise upon breach has the option to forego any suit on the contract and claim only the reasonable value of his performance. This is well settled in the New York cases.

Facts:

Plaintiff construction companies entered into a subcontract with defendant construction company to build an extension to an airport as called for by a main contract with the United States. Plaintiffs encountered unexpected soil conditions that made progress of their work difficult, and required work not called for by the contract. Plaintiff subcontractors made demands on defendant contractor for extra money, which was denied. Plaintiffs brought suit against defendant company and surety under the Miller Act, 40 U.S.C.S. § 270a et seq., for wrongful termination of subcontract. Plaintiffs sought recovery for the reasonable cost and value of the actual work performed, and the fair and reasonable rental value of the equipment for the period of use. Defendants filed a counterclaim for breach of contract by plaintiffs. The trial court found in favor of plaintiffs, and defendants appealed. Plaintiff subcontractor cross-appealed, protesting the recovery of allowance as insufficient.

Issue:

Was plaintiff’s claim for restitution after a breach of contract limited by the contract price?

Answer:

No

Conclusion:

Defendants contractor and its surety, argued that under the terms of the subcontract plaintiffs were not entitled to any allowance for extra costs over and above the contract price, even though entailed in consequence of the misrepresentations as to the subsoil conditions. They rely principally on Article 5 of the subcontract, wherein plaintiffs agreed that no representations as to subsurface conditions have been made, nor have they been induced to enter into the contract in reliance upon the drawings or plans, and they promised to make no claim for damages for unknown conditions. In support of their contention they cited several cases. But these cases are limited to claims for extra work, where the contract has not been wrongfully terminated by the employer. The situation is quite otherwise where, as here, defendants have breached the agreement. it is an accepted principle of contract law, often applied in the case of construction contracts, that the promise upon breach has the option to forego any suit on the contract and claim only the reasonable value of his performance.

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