G4S TECHNOLOGY LLC v MASS TECHNOLOGY PARK CORP. Mass SJC 2018

FACTS

Government owner hired design builder for $45M project (internet backbone for 400,000 Western Mass users).

The contract included requisition certifications that subcontractors had been paid and liquidated damages for late finish.

Project got delayed.  Owner held back payment on requisitions. Contractor issued change order requests.  Contractor submitted requisitions falsely stating that subcontractors had been paid in full.

Contractor sued owner for $10M in uncompensated cost due to owner delays – theories of recovery:

• Breach of contract

• Quantum meruit (non-contract-based recovery -value of services rendered – to prevent unjust enrichment)

Owner counter sued arguing that contractor committed fraud in certifying that it had paid subcontractors and so, should get nothing.

Trial judge found false certification was a material breach of contract and no recovery could be had on a breach of contract theory.  Judge also found that due to the false certifications by the contractor, it could not recover under any equitable theory like quantum meruit.

ISSUE 1

Could contractor recover for breach of contract where it was not complete, strict compliance with the contract – or should the rule be softened to apply just to material breaches?

HOLDING 1

Complete strict contract compliance is required for all construction contract terms relating to design and construction itself.  No recovery for the contractor under the contract because certification of having paid subcontractors is a key provision of the contract.

ISSUE 2

Can contractor whose good faith was questionable nonetheless recover under an equitable theory under its argument that Owner delays held up the job?

HOLDING 2

There needs to be a balancing of equities and the Court sent the case back for trial.  Where one party has received a benefit and the other has not been paid, arguments about unjust enrichment should be entertained even if there were intentional material breaches.  The courts should focus on equity and fairness and the value of the benefit conferred rather than a strict rule of no recovery for any party who has unclean hands to any extent.

Cobb Comment – important parties sought to soften the strict rule against breach of contract by anyone who had breached at all but the SJC rejected a materiality qualifier for key parts of construction contracts.  The Court opened the door to equitable arguments for people who bestowed valuable benefits without getting paid.