The Howard P. Foley Company, Appellant, v. J. L. Williams & Co., Inc., Highlands Insurance Co., Andstandard Brands, Inc., Appellees, 622 F.2d 402 (8th Cir. 1980)

This action arose out of the construction of a nut processing plant and warehouse in Fort Smith, Arkansas. A contract was entered into between appellee Standard Brands, Inc. (Standard Brands), the project owner, and appellee J. L. Williams & Co., Inc. (Williams), the prime contractor. A number of subcontractors were retained to work on the project, including appellant, The Howard P. Foley Company (Foley), who was hired to do the electrical work. Appellee Highlands Insurance Co., was the surety for Williams.

Foley and Williams entered into a contract whereby Foley agreed to perform all the work and furnish all materials outlined in the owner's specifications dealing with electrical work. The subcontract was a standard form, but typewritten onto the form was the following paragraph:

Time is of the essence in this contract. J. L. Williams & Co., Inc. has agreed to a liquidated damage clause in our contract with the owner. It is therefore imperative that the Bar Chart Schedule attached to this contract be strictly adhered to and any delays or deviations from this schedule be brought to the immediate attention of J. L. Williams & Co., Inc.

The paragraph was followed by a handwritten note, "No chart included," which was initialed by a representative of appellants.

The subcontract also provided as follows:

1. (a) The parties agree that in the event the Owner makes changes in the work to be performed by Contractor which increases or decreases the work or cost of work of the Subcontractor the Subcontract price will be changed accordingly, providing that such increases or decreases are approved in writing prior to such changes.

(b) * * * The Subcontractor shall prosecute the work undertaken in a prompt and diligent manner whenever such work, or any part of it, becomes available, or at such other time or times as the Contractor may direct, and so as to promote the general progress of the entire construction, and shall not, by delay or otherwise, interfere with or hinder the work of the Contractor or any other subcontractor. * * * The Subcontractor agrees to pay Contractor for any and all damages which are caused by Subcontractor's failure to furnish the materials and/or perform the work required by this Subcontract in the time and manner provided herein.

There was no corresponding clause in this instrument whereby the contractor assumed liability to the subcontractor for delay occasioned by the acts of the contractor.

Foley contended that the subcontract incorporated all the provisions of the main contract between Standard Brands and Williams (hereinafter the specifications), and the trial court analyzed the issues in terms of this incorporation.¹  Foley sought damages for delay in finishing the project on the theories that delay damages are recoverable under the terms of the contract and that appellees Williams and Standard Brands wrongfully interfered with appellant's performance of the contract.

The trial court issued a memorandum opinion and judgment in which it declared that under either theory the contract did not provide Foley with delay damages. We affirm in part and reverse in part.

I. Contractual Damages.

Of pivotal importance in the trial court's decision was Section 1B of the specifications:

(A) It is the desire of the Owner to have the work completed by May 1, 1975.

(B) The Contractor shall stipulate on the Bid Proposal Form the number of calendar days required to complete the work. Based on the Contractor's stipulated time, the sum of $3,000.00 per day will be assessed against the Contractor for failure to complete the work within the stipulated time for causes beyond his control as set forth in the General Conditions.

(C) 1. It is essential that the two-story portion of the facility be watertight and in a condition to receive processing and packaging equipment for installation by December 15, 1974.

2. The Owner agrees to pay the Contractor the sum of $1500.00 per day as a bonus if the two-story portion of the facility is completed as stated above and if all work is completed prior to May 1, 1975 and the facility is completely operational.

3. Any authorized extension of time beyond May 1, 1975 for any reason, will preclude the payment of the bonus.

(D) The time set for completion for work to be done under this contract is an ESSENTIAL condition of the contract.

The trial court decided that the contract allowed the owner a right to claim damages for delays but omitted a corresponding provision for the benefit of the contractor. Instead, the contractor was provided a bonus if he gave timely performance. Although Article 42(d)²  of the specifications bound the contractor to the subcontractors by all the obligations that owner assumed to contractor, a substitution of parties in the time of completion paragraph does not result in a payment of delay damages by contractor to subcontractor. Owner in the specifications did not expressly agree to pay delay damages and substituting the parties by incorporation (contractor for owner and subcontractor for contractor) does not result in the contractor derivatively assuming delay obligations towards subcontractor.

Foley on appeal quotes Section 1C, Article 26(e) of the specifications which provide for an extension of time: "This Article does not exclude the recovery of damages for delay by either party under other provisions in the Contract Documents."³  He contends that these damages are due under Section 1C, Articles 24, 25 and 29 of the specifications. These Articles provide for changes and extra work,⁴  claims for extra cost and damages,⁵  and suspension of work.⁶  In addition to mentioning that these sections have writing or notice requirements, compliance with which was not decided by the trial court, appellees claim that the law in Arkansas is to the effect that "the parties contract with a view to the possibility of delay and if damages for delay are to be recovered the contract must contain an express provision to that effect," citing Blair v. United States, 147 F.2d 840, 849 (8th Cir. 1945). This was stated by the Supreme Court of Arkansas in Brown & Froley v. Monroe County Road Imp. Dist., 153 Ark. 606, 612, 241 S.W. 39, 41 (1922):

It must be presumed that the parties were contracting with reference to all the conditions confronting them at the time, such as weather conditions and the difficulties to be encountered in obtaining gravel in sufficient quantities to keep appellants' forces steadily employed. Since the contract does not contain any such provision, liability of appellees predicated upon a breach of such provision cannot be maintained. If the appellant contemplated that such a duty and obligation should rest upon the appellees, then they should have seen to it that the contract contained such a provision. In the absence of such contractual duty and obligation, no damages can be recovered by the appellants as for a breach of contract in this respect.

The district court found that although the contract provided a right of the owner to claim damages for delay, the general contractor and thus the subcontractor, Foley, by substitution, did not have this contractual right. We agree.

Additionally the district court determined that Arkansas has never interpreted a "time-is-of-the-essence" clause, as found in the subcontract, to implicitly give rise to damages for delay in construction contracts. The court found that in this particular contract, the "time-is-of-the-essence" clause was relevant only to the owner's right and was not intended to implicitly provide a right to delay damages for other parties. We agree and affirm the district court's finding that no delay damages are recoverable for Foley under the express terms of this contract.

II. Wrongful Prevention.

Foley additionally argues that appellees wrongfully prevented appellant from performing the contract. Appellant's original and second amended complaint charged that Williams and Standard Brands "obstructed, hindered, interfered with and delayed the performance of plaintiff's work." Foley charges it did not have sufficient time to complete its work because Williams and Standard Brands failed to erect the structural steel in sufficient time; Williams failed to coordinate the project; and Williams and Standard Brands failed to furnish steel and machinery in accordance with the contract schedule.

The Supreme Court of Arkansas has awarded damages due to delay on the basis of unreasonable hindrance. In Housing Authority v. Forcum-Lannom, Inc., 248 Ark. 750, 454 S.W.2d 101 (1970) the contract provided that the plaintiff-contractor should notify the defendant's engineer when the utility lines to be removed were encountered so that this engineer could notify the local owner and "attempt to get prompt action." The court specifically found:

(T)hat the defendant was under a duty of cooperation to do whatever was necessary in the project area to enable plaintiff to perform its contract in an orderly manner and that defendant breached this duty in that it failed to use its best efforts to secure the removal of the utilities, underground and overhead, and that such failure unreasonably hindered and delayed the contractor in the performance of the contract.

Id. 454 S.W.2d at 104. Additionally, the court found in general:

(T)hat there were numerous and disrupting delays and suspensions, and that the contractor was never in a position to plan and follow any normal sequence in which the work was to be done on the project; that such delays and suspensions of work in excess of those which a contractor could or should reasonably anticipate as being normal, usual and customary in the performance of a contract of this nature.

Id.

In addition to his argument based on the express terms of the contract, Foley bases his wrongful prevention claim on the existence of an implied provision in every contract:

It is hornbook law that an implied provision of every contract is that neither party to the contract will do anything to prevent performance thereof by the other party or commit any act that will hinder or delay performance.

Peter Kiewit Sons' Company v. Summit Construction Co., 422 F.2d 242, 257 (8th Cir. 1969), and Investors Thrift Corporation v. Hunt, 387 F. Supp. 517, 524 (W.D. Ark. 1974), aff'd, 511 F.2d 1161 (1975).

This implied obligation was recognized in L. L. Hall Construction Company v. United States, 379 F.2d 559, 563, 177 Ct. Cl. 870 (1966):

(I)t is clear from the cases cited by the parties and the numerous other decisions of this court, that where the Government unreasonably hinders or delays a contractor's performance, even though it does not prevent the eventual completion of the contract, it has breached its implied obligation not to delay the contract, in the absence of a clause expressly exempting it from such liability.

We are aware of the existence of an extension of time clause, Section 1C, Article 26,⁷  in the specifications of this present case and that if the "Contractor (subcontractor) be delayed at any time in the progress of the Work by any act or neglect of Owner (contractor) * * * then the time of completion shall be extended * * *." Although such a clause, in conjunction with additional facts, may be indicative that a defendant did not obligate itself to complete certain work by a certain time, Burgess Construction Company v. M. Morrin & Son Company, Inc., 526 F.2d 108, 114 (10th Cir. 1975), cert. denied, 429 U.S. 866, 97 S. Ct. 176, 50 L. Ed. 2d 146 (1976), it does not necessarily provide an exemption from damages for delay. In Commerce International Company v. United States, 338 F.2d 81, 167 Ct. Cl. 529 (1964) the plaintiff-contractor's only recourse for delay was to seek an extension of the time of his performance as the contract was absent any warranty for delay damages. However, the court remarked:

But this general principle presupposes that the Government has met the ever-present obligation of any contracting party to carry out its bargain reasonably and in good faith. * * * It would be intolerable if the Government could disregard that responsibility, or were free to stretch its tardiness for however long it fancied, without sterner control than the mere prolongation of the completion date of the contract.

Id. at 85.

In the present case, it may be Foley's burden to prove that any unreasonable or undue delay was tied to appellees' breach of their implied obligation of reasonable cooperation. However, we cannot find in the district court's decision that a ruling was made on this issue. We therefore find that the court failed to rule on appellant's theory of an implied obligation and remand this issue to the district court for a decision based upon the evidence already presented.⁸ 

The judgment of the district court is affirmed in part and remanded in part for further decision in accordance with this opinion.