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Edwards Construction v. Toll Highway Authority

DECEMBER 31, 1975.

J.F. EDWARDS CONSTRUCTION CO., PLAINTIFF-APPELLEE,

v.

THE ILLINOIS STATE TOLL HIGHWAY AUTHORITY, DEFENDANT-APPELLANT.



APPEAL from the Circuit Court of Whiteside County; the Hon. FREDERICK P. PATTON, Judge, presiding.

MR. JUSTICE BARRY DELIVERED THE OPINION OF THE COURT:

Rehearing denied February 9, 1976.

Plaintiff-contractor and defendant-project owner were parties to a written agreement, dated May 5, 1972, wherein plaintiff undertook to construct lighting improvements along defendant's east-west tollway then under construction by other contractors. The amended complaint, with a portion of the contract attached as an exhibit, was filed in two counts. Count I sought a declaratory judgment that plaintiff is entitled to a reasonable extension of time for completion of the contract work; count II sought payment for additional costs incurred in executing the contract work. Plaintiff's right of relief under both counts was alleged to derive from delays occasioned by defendant's breach of an implied duty to have prepared construction sites available to plaintiff on or before the starting date of plaintiff's contract on May 8, 1972, or within a reasonable time thereafter. Both counts alleged that defendant failed in this duty by "negligently scheduling" the necessary preliminary work of other contractors (i.e., for earthwork and grading) so that they would have "the same completion date [i.e., October 1, 1972] as that specified for the completion of the work undertaken by plaintiff." This "negligent scheduling" was characterized in the pleading as "active interference" by defendant which made the work sites unavailable to plaintiff within the time scheduled by the contract for its performance and occasioned delays which increased plaintiff's costs, and therefore entitled plaintiff to a reasonable extension of time. Both counts were dismissed on defendant's motion supported by affidavits furnishing contract specifications (by Judge Rink); the circuit court held that the implied duty pleaded in the amended complaint was a conclusion of the pleader negated by the express language of the agreement sued upon. Plaintiff was given leave to file an amendment by adding count III. Thereafter, a default was entered against defendant for failure to respond to count III within the time ordered. Defendant's motion to vacate the default was denied and the cause proceeded to trial before a different judge, without a jury, under count III for the value of items of "extra work" allegedly furnished under the contract. Defendant appeals from an adverse judgment under count III in the amount of $149,661.93; plaintiff cross appeals from the order dismissing counts I and II.

• 1, 2 We consider first, the propriety of the order dismissing counts I and II of the amended complaint. There is substantial authority to support the view that one who contracts to provide labor and materials for a construction project with the reasonable expectation that it will be done within a particular period, and who is thereafter delayed through no fault of his own, but by virtue of the act of the other contracting party, will be entitled to recover for any consequential damages. (Annot. 16 A.L.R.3d 1252 (1967).) But potential loss from delay is inherent in any construction project (McDaniel v. Ashton-Mardian Co., 357 F.2d 511, 517, 16 A.L.R.3d 1243 (9th Cir. 1966)), particularly one involving coordinated efforts of multiple contractors. And if from the express provisions of the particular contract, it is apparent that the delay complained of was fully anticipated and provided for, and the right of recovery is expressly limited or precluded (Herlihy Mid-Continent Co. v. Sanitary District, 390 Ill. 160, 60 N.E.2d 882 (1945); Underground Construction Co. v. Sanitary District, 367 Ill. 360, 11 N.E.2d 361 (1937); Ryan Co. v. Sanitary District, 317 Ill. App. 549, 47 N.E.2d 576, aff'd, 390 Ill. 173, 60 N.E.2d 889 (1945); County of Cook v. Sexton, 16 Ill. App. 93 (1884), aff'd, 114 Ill. 174, 28 N.E. 608 (1885); see Annot., 91 L.Ed. 48-80 (1946)), or if it is apparent from all the provisions of the agreement that it provides no reasonable basis for the expectation on the part of a complainant that the work could be done by a fixed period (H.E. Crook Co. v. United States, 270 U.S. 4, 70 L.Ed 438, 46 S.Ct. 184 (1926); United States v. Rice, 317 U.S. 61, 87 L.Ed. 53 (1942); United States v. Howard P. Foley Co., 329 U.S. 64, 91 L.Ed. 44, 67 S.Ct. 154 (1946)), then these provisions will control. At Restatement of Contracts § 315 (1932), the principle is given:

"(1) Prevention or hindrance by a party to a contract of any occurrence or performance requisite under the contract for the creation or continuance of a right in favor of the other party, or the discharge of a duty by him, is a breach of contract, unless

(a) * * *

(b) the terms of the contract are such that the risk of such prevention or hindrance as occurs has been assumed by the other party." (Emphasis added.)

In Crook plaintiff-contractor undertook with the government to install heating systems in a foundry building and in a machine shop, both of which were then under construction by different governmental contractors. The facts alleged in the case at bar are similar. In Crook, the completion date specified in plaintiff's contract was March 19, 1918; the completion dates in the preliminary construction contracts for the foundry building and the machine shop were March 17, 1918, and February 18, 1918, respectively. In the case at bar, plaintiff's completion date is alleged to have been October 1, 1972, and that of the preliminary work contractors about the same. In Crook, the building contractors fell behind schedule by nearly a year causing delays to plaintiff and additional costs for which suit was brought against the government. There was no suggestion in Crook that the contract had any express provision exonerating the government from losses occasioned by its own delays. There is no such provision in the contract in the case at bar. Nonetheless, in denying recovery to plaintiff in Crook, and in finding that the contract imposed no duty upon the government to have the contemplated structure ready for plaintiff's work by any fixed time, Mr. Justice Holmes concluded from all its provisions, that the agreement made it clear that the parties contemplated from the beginning that the time fixed for plaintiff's performance was provisional. It is appropriate to observe that where there exists no duty to have the contemplated site ready by a fixed time, there exists no occasion for a clause exonerating the project owner from damages for its delays in that respect.

The agreement in Crook, like the one here, anticipated that plaintiff's progress would depend upon and be affected by the progress of the other contractor's preliminary work. The agreement there like the one here stated that the government had the right to make changes in the plans and to interrupt the continuity of the work. The fact that the completion dates for the work of building contractors in the Crook case were the same, or nearly the same as that specified for the complainant, as is alleged in this case, was not held an incident of faulty or actionable scheduling by defendant, or a breach of any duty owed the plaintiff, but notice to plaintiff at the outset that the government had no duty to make the sites available by a fixed time and that should these other contractors fall "behindhand" for any reason, even because of changes made by the government, plaintiff must also necessarily be delayed. It was for all these contingencies, anticipated at the outset, said Mr. Justice Holmes, that plaintiff accepted the contract price in full satisfaction, with no remedy except, in a just case, for a right to an extension of time.

The validity of the reasoning in Crook has since been reexamined and reaffirmed by the Supreme Court in United States v. Rice, 317 U.S. 61, 87 L.Ed 53 (1942), and was adhered to by the Court of Claims in Gilbane Building Co. v. United States, 333 F.2d 867 (Ct.Cl. 1964). The case of United States v. Howard P. Foley Co., Inc., 329 U.S. 64, 91 L.Ed 44, 67 S.Ct. 154 (1946), following the same precedent, involved a factual circumstance similar to that alleged by plaintiff here. In that case the complainant was an electrical contractor who had a contract with the government to install a lighting system at the National Airport, then under construction by other governmental contractors. The exact time specified for complainant's performance was 120 days after notice to proceed. The preliminary work of earthwork contractors took longer than the government had anticipated, in consequence of which complainant's project required 277 days for completion. Notwithstanding the obligation of complainant to complete within 120 days, Mr. Justice Black stated that this undertaking on the part of the contractor could not be converted into a promise on the part of the government that it would make the project site available at any particular time where other provisions clearly indicate that delays were to be anticipated at the outset and provided therefor.

The provisions of the contract in the case at bar are parallel to those examined in Crook and Rice and Foley, and provided as well that plaintiff was chargeable at the outset with all that was observable from inspection of site conditions, including in respect to the status of the work and progress of other preliminary contractors; that the progress of plaintiff's work, notwithstanding the dates specified for performance, was also to be controlled from the outset by defendant's engineer; and that delays occasioned to plaintiff whether by the work or progress of other preliminary contractors, or by the elements, or by any changes in the work or revision in progress schedules made by defendant, or by suspensions or discontinuances ordered by defendant, would not be cause for claims for additional costs. Moreover, the agreement here provided that the contract price shall be

"full payment for the work, including but not limited to, furnishing all materials, transportation, labor, tools and equipment for performing all work contemplated and embraced under the contract; for all loss or damage arising out of the nature of the work or from the action of elements; for any unforeseen difficulties or obstructions which may arise or be encountered during the progress of the work until its final acceptance * * *; for all risks of every description in connection with the prosecution of the work; also for all expenses incurred by or in consequence of suspension or discontinuance * * *."

The time fixed for plaintiff's performance was, at the outset, clearly provisional and for the benefit of defendant only. There were not only provisions for delays and revisions of schedules, but defendant also had the right to require plaintiff to provide additional crews and to work additional shifts and hours, all without added costs, if in its judgment that should become necessary to meet the target date of October 1, 1972, designated for the opening of the tollway, or to meet revised progress schedules. It is the presence of all these foregoing provisions which, in our judgment, distinguishes the contract in the case at bar from the contract considered in Consumers Construction Co. v. County of Cook, 1 Ill. App.3d 1087, 275 N.E.2d 696 (1st Dist. 1971). In that case, considering all the covenants of the agreement, time for the contractor's performance was not provisional in any sense but was expressly made "of the essence" of the agreement. The time allotted there for the contractor was not merely for the benefit of contractee, but provided basis for the reasonable expectation on the part of contractor that its work could be performed within such period, and in the circumstance of delays arising without its fault, defined also the time when there arose on its behalf an option of terminating the contract work. In the contract here, which expressly contemplated the possibility of delays and provided for them at the outset, the incident of such delays can not be deemed occasions for the contractor having an option to terminate the contract work.

In our judgment, the other cases cited by plaintiff are also not in point. In Tobey v. Price, 75 Ill. 645 (1874), Taylor v. Renn, 79 Ill. 181 (1875), and J.J. Brown Co. v. J.L. Simmons Co., 2 Ill. App.2d 132, 118 N.E.2d 781 (1st Dist. 1954), the contractees expressly undertook some duty which was necessarily preliminary to the contractors' performances, and there were no provisions in the agreements giving contractors notice at the outset that delays should be expected and that the contract price was to be in full satisfaction for all such contingencies. In Tobey v. Price, the contract specified, to the contrary, that owner would provide iron work and cut stone which was essential for the contractor's masonry work, and that owner would be liable for neglect or omission of that duty in which he defaulted. In Nelson v. Pickwick Associated Co., 30 Ill. App. 333 (1889), and W.H. Stubbings Co. v. World's Columbian Exposition Co., 110 Ill. App. 210 (1903), the express provisions of the contract, considered as a whole, did not negate the presence of an implied duty on the part of the contractees to have the construction sites available; the question presented for determination in those cases was whether provisions allowing for extensions of time for contractors' performances in event of delays should be construed as meaning to deny contractors the right also to be compensated for the extra costs. A similar question was raised in J.J. Brown Co. v. J.L. Simmons, where the contractee expressly undertook the preliminary duty of providing temporary heating for complainant's plastering work. It was decided in that case that provisions for extensions of time to the contractor in the event of delays, and conferring upon contractee the right to control the progress of the work "so as not to delay construction," do not indicate an intention to preclude the contractor from a right to recover compensation for the added costs deriving from delays occasioned by contractee. In John P. Brady & Co. v. Board of Education, 222 App. Div. 504, 226 N.Y.S. 707 (1928), and cases of similar import cited by plaintiff, the question presented was whether under the circumstance of a contract imposing an express or implied duty upon the part of the owner or contractee to perform some duty preliminary to a complainant's performance, a clause explicitly exonerating such owner or contractee from damages caused by delay in executing his obligation was enforcible. While such exculpatory clauses are usually deemed valid (see Annot., 10 A.L.R.2d 801 (1950)), they are also sometimes strictly construed, as in John P. Brady Co., so as to preclude an unconscionable result that could not reasonably have been intended under the particular language of a contract.

We think the rules of these cases are inapplicable here, however. Our concern is not to isolate and interpret the meaning and effect of an "exculpatory provision," to see if a delay in the performance of an established duty falls within its terms. As noted earlier, there is no clause in the contract here which purports to exonerate defendant from liability for its own delays, but the absence of such a clause is compatible with the conclusion that the contract itself imposes no duty upon defendant to provide prepared construction sites within any fixed time for which it could be liable on default. While there does exist an exculpatory clause in respect to delays occasioned by other contractors, it is also clear here that the contract, unlike those in the cases cited by plaintiff, expressly provides that such delays, while providing basis for an extension of time in a just case, will not provide a basis for extra costs. The enforceability of this exculpatory provision, or its reasonableness, is not involved in this cause, however, since the delays complained of in the amended complaint are delays of defendant in executing an implied duty to have sites available by a fixed time, and not delays of other contractors to which the exculpatory clause purports to apply.

Neither are we called upon in this case to decide whether the provisions of the particular contract, in respect to extensions of time, mean to deny plaintiff the right also to be compensated for extra costs arising from defendant's delay in the execution of a given duty. The issue here is the more basic and underlying one of determining whether defendant ever had the duty at all upon which plaintiff relies, and the breach of which could give rise to an occasion of damages for delay in the absence of an enforcible exculpatory provision or one purporting to provide the sole remedy of extended time for performance. On that question, the principles applied in Crook and the cases following it conform to those applicable under Illinois law.

• 3 Considering all of the provisions of the contract here, and isolating none from context (Illinois Education Association Local Community High School District 218 v. Board of Education, 23 Ill. App.3d 649, 320 N.E.2d 240 (1st Dist. 1974)), we are persuaded that the circuit court correctly determined that its express covenants are not compatible with the existence of the ...


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