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Board of Regents v. Wilson

APRIL 8, 1975.




APPEAL from the Circuit Court of De Kalb County; the Hon. CARL A. SWANSON, Judge, presiding.


This is an interlocutory appeal by defendants, Miller-Davis Company and its sureties, who are joined as defendants under their performance bonds wherein they guaranteed plaintiff that Miller-Davis would well and truly perform the work of erecting certain buildings according to the terms and specifications of the contracts. They appeal from the trial court's denial of their motion to dismiss plaintiff's complaint against them. This appeal is pursuant to Supreme Court Rule 308. (Ill. Rev. Stat. 1973, ch. 110A, par. 308.) The question of law certified by the trial court is "whether the four contracts bar any claims by plaintiff except for defects appearing within one year as provided in the respective contracts."

• 1 The issue arises from a ruling on defendants' motion to dismiss, therefore all facts well pleaded in plaintiff's complaint must be taken as true.

Between January 20, 1964, and March 1, 1967, the plaintiff and defendant, Miller-Davis Company, entered into four contracts for the construction of eight 12-story residence halls at Northern Illinois University at DeKalb. The total contract price for the eight buildings was $12,970,391. The buildings were constructed in four successive phases, each phase providing, under a separate contract, for the construction of two residence halls. Final payment under all four contracts was made on or before July 9, 1969.

Precast concrete panels, weighing about 3 1/2 tons each, formed the exterior walls of the residence halls constructed by defendant. On December 18, 1972, one of these panels tore loose from its anchoring and fell to the ground. Plaintiff conducted an investigation to ascertain what had caused the panel to fall and to determine whether other panels were in danger of falling. To check the anchoring of each panel it was necessary for plaintiff to drill through the interior walls of the residence halls. The investigation disclosed that the fallen panel and a number of other panels were inadequately anchored. Plaintiff subsequently had the defects remedied. Its complaint prays for $1,500,000 as damages.

Plaintiff's complaint alleges that the construction contracts were breached by Miller-Davis in 29 specific acts or omissions, all relating to the inadequate anchoring of the panels. These acts or omissions can generally be classified as failure to comply with plans and specifications, faulty workmanship and the use of faulty materials.

Defendants assert that the trial court erred in denying the motion to dismiss the counts of the complaint against them and argue that the four construction contracts precluded plaintiff's claim because the defects did not appear or develop within the 1-year period after final payment. *fn1

The four contracts include documents copyrighted and published by the American Institute of Architects (A.I.A.), as well as a general agreement, supplementary general conditions, and construction specifications. The relevant provisions of the first three contracts are entitled, "Correction of Work," "Final Payment," "Damages," and "Guarantee." (Since the provisions of these three contracts do not materially vary, we footnote the provisions of one.) *fn2 The relevant provisions of the fourth contract are entitled, "Warranty and Guarantee," "Damages," "Certificates for Payment," "Final Payment," "Correction of Work" and "Guarantee." *fn3

• 2-7 In construing specific provisions in terms of the whole contract, the primary objective is to give effect to the intent of the parties (Schek v. Chicago Transit Authority, 42 Ill.2d 362, 364 (1969)), and intent must be determined from the words used. (Tatar v. Maxon Construction Co., 54 Ill.2d 64, 67 (1973).) The construction given the letter of the written instrument is controlled by its spirit and purpose and the terms are to be interpreted so as to subserve and not subvert such intent. (United States Trust Co. v. Jones, 414 Ill. 265, 271 (1953); Hoyt v. Continental Casualty Co., 18 Ill. App.3d 599, 601 (1974).) A strict construction that reaches a result different from that intended should not be adopted. (Harvey v. Rolands of Bloomington, Inc., 94 Ill. App.2d 444, 449 (1968).) It is presumed that all provisions of a written contract were inserted for a purpose, since parties do not ordinarily insert meaningless terms into their contracts. The provisions, therefore, must be construed together and, if possible, effect given each one. Valerio v. R. & R. Construction Co., 20 Ill. App.3d 48, 53 (1974).

• 8, 9 In construing a contract, it is also necessary to consider the laws which exist at the time and place of its making. Such laws enter into and form a part of the contract as fully as if they were expressly referred to or incorporated into its terms.

"This principle embraces alike those [laws] which affect its validity, construction, discharge and enforcement. (Citations omitted.) Contracts are presumed to have been entered into in the light of existing principles of law, (citation omitted) and the existing law is presumed to be a part of every contract, (citation omitted) and contracts should be so understood and construed unless otherwise clearly indicated by the terms of the agreement." (Illinois Bankers Life Ass'n v. Collins, 341 Ill. 548, 552-53 (1930).)

See also Schiro v. W.E. Gould & Co., 18 Ill.2d 538, 545 (1960); Jack Spring, Inc. v. Little, 50 Ill.2d 351, 361-62 (1972).

• 10 It is a basic principle of contract law that parties by an express agreement may contract for an exclusive remedy that limits their rights, duties and obligations. (United States v. Vander Heyden, 158 F. Supp. 930, 932 (S.D. Ill. 1958); see also Jackson v. First National Bank, 415 Ill. 453, 461 (1953).) The contract, however, must clearly indicate that the intent of the parties was to make the stipulated remedy exclusive. Standard Oil Co. v. Burkhartsmeier Cooperage Co., 333 Ill. App. 338, 348-49 (1948); Continental Grain Co. v. Fegles Construction Co., 480 F.2d 793, 796 (8th Cir. 1973); Annot., 84 A.L.R. 2d 322, 332 (1962).

• 11-13 In each of the first three contracts herein, the "Damages" provision limits recovery of damages to claims made prior to final payment "except as expressly stipulated otherwise in the case of faulty work or materials." This is the general provision controlling claims for damages and the quoted portion excludes claims for faulty work or materials from the final payment limitation. The quotation further refers us to other provisions of the contracts regarding claims for faulty work or material. The specific provisions, which control the general, are "Correction of Work," "Guarantee" and "Final Payment." The "Correction of Work" and "Guarantee" provisions place a duty upon the contractor, after notice from the owner, to correct any defects due to faulty workmanship or materials which may appear or develop within 1 year after final payment. These two provisions do nothing more than establish that for a period of 1 year defendant has a duty to rectify any such defects; the provisions in no way limit plaintiff, after that 1 year, from claiming damages as the result of faulty work or material. The duty imposed upon defendant for the 1-year period carries the corresponding right ...

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