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Carter v. Sherburne Corp.

Supreme Court of Vermont, Rutland
315 A.2d 870 (1974)
ELI5:

Rule of Law:

In construction contracts, time is generally not of the essence unless expressly stated, and a party who causes a delay in performance cannot hold the other party liable for that delay. When one party is induced to perform extra work by a promise that is later broken, they may recover the reasonable value of their services on a quantum meruit basis.


Facts:

  • Plaintiff and defendant entered into four written contracts for construction work related to a development near Sherburne Mountain, including road work and cutting a gondola lift-line.
  • The contracts specified completion dates and provided for weekly progress payments, with the defendant retaining 10% until final acceptance.
  • During the project, the defendant constantly shifted the plaintiff’s activities from one contract to another.
  • The defendant also withheld payments from the plaintiff without justification, causing the plaintiff financial difficulties.
  • The defendant's representatives promised the plaintiff extensive additional work contracts in the future.
  • In reliance on this promise, the plaintiff performed certain extra work without compensation.
  • The defendant ultimately did not award the promised additional work to the plaintiff and terminated the existing contracts.

Procedural Posture:

  • The plaintiff sued the defendant in Eutland County Court, a court of first instance.
  • The plaintiff sought full payment under written contracts and recovery on a quantum meruit basis for extra work.
  • The defendant asserted a counterclaim for expenses allegedly caused by the plaintiff's failure to perform.
  • The trial court found for the plaintiff, ruling he was in substantial compliance and that the defendant's termination of the contracts was wrongful.
  • The trial court awarded the plaintiff damages for unpaid invoices and the value of the extra work.
  • The defendant appealed the judgment of the County Court.

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Issue:

In a construction contract that specifies completion dates but does not expressly state that time is of the essence, does a contractor's failure to meet those dates constitute a material breach excusing the other party's obligation to pay, especially when the delays are caused by the other party's own actions?


Opinions:

Majority - Shangraw, C.J.

No. A contractor's failure to meet completion dates does not constitute a material breach excusing payment where time is not of the essence and the delays were caused by the paying party. As a general rule, time is not of the essence in construction contracts unless there is an express provision making it so. The court reasoned that the inclusion of completion dates and forfeiture provisions for non-completion is actually evidence that time is not of the essence, as it establishes a remedy for delay short of contract termination. Furthermore, the court found that most of the delays were caused by the defendant's own actions, such as constantly shifting the plaintiff's work and improperly withholding payments. Under the implied obligation of good faith and fair dealing, a party may not obstruct or hinder a contractor’s work and then seek damages for the delay it caused. The delays were therefore excused, and the defendant's termination of the contracts was without legal justification. The plaintiff was also entitled to recover on a quantum meruit basis for the extra work performed in reliance on the defendant's unfulfilled promise of future contracts.



Analysis:

This decision reinforces the default rule that time is not of the essence in construction contracts, placing a high bar on parties seeking to terminate a contract solely for delays. It underscores the critical importance of the implied covenant of good faith and fair dealing, preventing a party from strategically hindering performance to create a pretext for non-payment or termination. The ruling solidifies the principle that a party causing a delay is estopped from benefiting from it. For future cases, this means that unless a contract contains explicit 'time is of the essence' language, courts will excuse delays caused by the complaining party and will likely not find a material breach.

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