Sutton Corporation v. MDC, 423 Mass 200 (1996)
Massachusetts’ highest court, the Supreme Judicial Court (SJC), recently handed down a decision that gives teeth to a statute (M.G.L., c.30, §39N) providing for equitable adjustments in contract price where a contractor on a public project encounters unanticipated differing subsurface conditions. The SJC ordered the Metropolitan District Commission, a public agency, to pay Sutton’s increased costs to perform work required by the specifications, where actual subsurface conditions differed substantially from conditions ordinarily encountered for that type of work.
In reaching its decision, the SJC rejected and reversed an earlier decision of the Appeals Court that refused Sutton any adjustment under the statute even while conceding Sutton had incurred substantially increased costs as a result of differing subsurface conditions. The Appeals Court denied relief on the narrow ground that Sutton had not provided timely itemized statements of its damages required by contract provisions governing extra work claims. (See Construction Law Comments – Spring 1996)
Because of the importance to general contractors and subcontractors alike to be able to recoup increased costs caused by differing subsurface conditions they could not anticipate in their bids, several trade associations, including Associated Subcontractors of Massachusetts (ASM), filed briefs with the SJC in support of Sutton.
In its decision favoring Sutton (and all public contractors) the SJC adopted arguments advanced by ASM*, ruling Sutton’s right to an equitable adjustment was governed by provisions stated in the statute, not by provisions imposed by the contract. The sole notice required by c.30, §39N was one written notice sent to the public owner after the differing site condition was discovered, a notice that Sutton provided. The court held additional notice requirements, stated in the contract relating to extra work claims, did not apply to Sutton’s claim for equitable adjustment. They did not apply because Sutton was not performing work extra to the contract, but was performing contract work that simply cost more because of unanticipated site conditions, and for which the statute required an equitable adjustment.
This decision does not mean contractors may ignore contact notice provisions. To the contrary, the decision impliedly recognizes the right of public owners to impose these notice requirements on extra work claims, and to refuse payment to contractors who fail to meet them. But the SJC has given recognition to the principle that public owners may not circumvent a statute affording equitable relief to contractors by imposing contract requirements that frustrate the statute’s purpose.
As a result of this decision, contractors may now pursue claims for equitable adjustment based on unanticipated differing site conditions by simply providing written notice of such conditions when discovered. No longer may a public owner avoid its obligation to make an equitable adjustment by writing into the contract difficult notice requirements that exceed those provided by the statute.
*ASM was ably represented by Joe and Sally Corwin who are long-time counsel to ASM and the founding and senior partners of Corwin & Corwin LLP.
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