42105: Construction Contracts and Law Page 1
Identify: STUDENT NAME Date: February 11, XXXX
CMGT 42105: Construction Contracts and Law
CASE BRIEF
Quotation: Interstate Contracting Company v. Metropolis of Dallas, Texas No. 03-0152
Case Info: On September 14, 1994, the Metropolis of Dallas and Interstate Contracting Company (ICC)
entered into a set sum contract for the development of levees round a Metropolis water therapy plant; the
excavation of two areas to create storm water detention lakes; and miscellaneous work together with trash
removing, surveying, and linear depth checking. ICC subcontracted Mine Companies, Inc. (MSI) to
excavate the storm water detention lake and assemble the levees. If it met the specs, the
excavated materials was for use to assemble the levees. After commencing work, Mine Companies, Inc.
found that among the supplies within the lakes differed from what it anticipated and couldn’t be
immediately used to assemble the levees. MSI was subsequently compelled to fabricate fill materials by mixing
sand with the restricted portions of clay which, in impact, decreased its productiveness and elevated its
prices. ICC knowledgeable the Metropolis of MSI’s extra prices however the metropolis refused to pay for MSI’s extra
prices. ICC filed go well with on behalf of MSI in opposition to the Metropolis for breach of contract, quantum meruit, breach
of implied guarantee, and fraudulent inducement. The district courtroom allowed ICC to convey these claims
on behalf of MSI and a jury discovered that the Metropolis breached its contract with ICC. The jury additionally discovered
that the Metropolis breached an implied guarantee to supply correct and appropriate plans and specs
which had been inconsistent with the onsite situations. The Metropolis appealed to the Fifth Circuit, arguing that
the district courtroom erred in concluding that ICC might search and acquire damages on behalf of its
subcontractor as a result of there’s a lack of privity of contract between the Metropolis and MSI.
Authorized Subject (Question Assignment): Can a contractor assert a declare in opposition to an proprietor on a subcontractor’s behalf
when there isn’t a privity of contract between the subcontractor and the proprietor?
Choice (Reply): Sure.
The Supreme Court docket held that, just like different jurisdictions, Texas would allow a contractor to pursue
claims on behalf of its subcontractor, supplied the contractor stays liable to the subcontractor.
Apply Notes: A pass-through declare is a declare by a celebration who has suffered damages in opposition to a
accountable celebration with whom it has no contract. The declare is offered by means of an intervening celebration
who has a contractual relationship with each. It will be significant for the proprietor to grasp that the prime
contractor can acquire damages on behalf of the subcontractor, who will not be in privity of contract with the
proprietor, by means of pass-through claims. The proprietor can, as established underneath the Severin doctrine, defeat
the subcontractor’s pass-through declare if he (the proprietor) proves that the contractor would “not be liable
to the subcontractor if it refused to current the pass-through declare or to remit the restoration to the
subcontractor.”
Subcontractors should pay attention to exculpatory clauses of their contracts with the prime that will deem
pass-through claims unenforceable. Clauses within the contract settlement just like the ‘no-damages-for-delays’
clause, although unenforceable in lots of states might preclude the overall contractor from suing the proprietor
on behalf of the subcontractor. The sub should scrutinize the contract paperwork and be certain that they
account for the dangers which are within the settlement together with such exculpatory clauses.
