May 7, 2021
By Lee B. Brumitt
Over the years, I’ve noticed a tendency for some contractors to downplay the significance of contract language that is blatantly contrary to their interests. The thought is that the contract language is so bad that no considerate or fair court would ever really enforce it. The truth is that courts are not in existence to correct and rebalance a bad contract because it’s the moral thing to do. When it comes to business deals, the court’s role is to give plain meaning to the terms and enforce the agreement the parties make.
In the recent case of ADB Companies, Inc. v. Socket Telecom, LLC, one contractor learned this lesson the hard way. ADB entered into a contract with Socket, an internet service provider, to lay over 100 miles of fiber in central Missouri. The contract required the installation of fiber within 150 calendar days excluding weekends and holidays. The contract specifically provided that ADB was entitled to an extension of the deadline if Socket delayed the completion of the project by failing to provide necessary materials, easements, and right of ways and if ADB requested extensions of time in writing within ten days after the occurrence of a delaying event. Failure to complete the project on time would result in liquidated damages of $2,500 per day.
The project was not completed on time and Socket assessed liquidated damages of over $100,000. ADB brought suit, and the trial court heard evidence that Socket delayed the project by not obtaining easements or materials on time. ADB prepared weekly meeting notes showing the various items it was waiting on each week. In the weekly phone calls, ADB verbally advised Socket of the impact the delays were having on its progress. However, ADB never requested an extension of time from Socket in writing. The trial court found that notice of delay was provided during the weekly meetings and through minutes distributed to all parties and Socket could not legally withhold liquidated damages. The trial court found that Socket owed not only the principal amount withheld but also interest on that amount and attorneys’ fees under the Missouri Private Prompt Pay law.
Socket appealed the judgment. The Missouri Court of Appeals for the Western District of Missouri reversed the trial court’s decision finding that ADB did not comply with the terms of the contract in that it failed to request an extension of time in writing, much less within ten days of any act of delay on Socket’s part. The court found that discussions occurring in the weekly meetings or minutes of those meetings did not meet the contract requirement to provide a written request for extension of time.
This case and many before it stand for the principle that courts will not remake a contract for parties despite what may seem like lopsided justice. Contractors cannot take contract terms lightly and must understand and apply terms requiring notice in a timely manner. Projects subject to liquidated damages require particular diligence to protect against the result in the Socket case.
For more information, contact Lee Brumitt at email@example.com or (816) 714-3027.