Construction Law - Dennis J. Webb, Jr., Justin S. Scott, and Henry L. Balkcom Iv

• Publication year: 2002

Construction Lawby Dennis J. Webb, Jr.^* Justin S. Scott^** and

Henry L. Balkcom IV^***

This Article surveys construction law decisions handed down by Georgia appellate courts between June 1, 2001, and May 31, 2002. The cases discussed fall primarily within seven categories: (1) contract; (2) tort; (3) mechanic's and materialman's liens; (4) payment and performance bonds; (5) workers' compensation; (6) arbitration; and (7) legislation. The Article also includes a miscellaneous section covering noteworthy cases that do not fit neatly into the sections enumerated above.

I. Contracts

The court of appeals decided many cases involving claims for breach of contract during the survey period. Most did not address novel issues. The court of appeals did, however, revise its earlier position on the applicable limitations period for a homeowner's breach of contract action for damages from the use of defective synthetic stucco.

A. Promissory Estoppel; Statute of Frauds

SKB Industries, Inc. v. Insite¹ arose out of the construction of the Georgia International Plaza for Atlanta's 1996 Summer Olympic Games. General contractor Beers Construction Company accepted bids from various sub-contractors to execute portions of the work. Insite, a hardscaping sub-contractor, prepared a bid to perform both the landscaping and hardscaping work. In connection with this endeavor, Insite accepted a bid from sub-subcontractor SKB to carry out the landscaping portion of the work. Because the landscaping component of Insite's proposal was substantially lower than others, Beers gave SKB an opportunity to confirm that its bid was based upon the specified materials. SKB initially stated that its bid was based upon the required materials. It subsequently conceded that its bid incorporated materials less expensive than those originally specified, however. Nevertheless, for reasons not discussed, Beers permitted SKB to perform the landscaping work using the less expensive materials.²

Insite subsequently entered into a contract with Beers for approximately three million dollars, about one million dollars of which was for work to be performed by SKB. SKB failed to sign, however, a subcontract agreement with Insite. After beginning work, SKB failed to complete a significant portion of it. Insite refused to pay SKB $392,150.

SKB brought suit against Beers and Beers's surety. Beers and its surety settled the action. Insite later sued SKB on the theory of promissory estoppel, claiming that it was damaged when SKB did not complete the work as promised. The jury awarded Insite $711,573.42 on its promissory estoppel claim.³

On appeal, SKB maintained that Insite could not recover under the theory of promissory estoppel, arguing that there could be no justifiable reliance by Insite when no written agreement existed between the parties, as required by the statute of frauds.⁴ The court of appeals rejected SKB's argument and held that the statute of frauds "does not operate to prevent use of the equitable principle of promissory estoppel to enforce a promise which was expected to and did induce detrimental reliance."⁵

B. Quantum Meruit; Action on Commercial Account

Wingate Land & Development, LLC v. Robert C. Walker, Inc.,⁶ concerned an action by architect Walker against land developer Wingate. Walker sought payment for architectural services rendered in connection with the design and construction of a golf course. Initially, Walker submitted a proposal to Wingate to perform golf course design services. Wingate accepted it, but requested that Walker restructure the payment schedule so that the bulk of the services were paid for on the back end of the project. The project went forward, the parties operated in accordance with their agreed upon terms, but they never executed the agreement as modified.⁷

Subsequently, a dispute arose regarding the amount of construction management services that the agreement required Walker to perform. As a result, Wingate refused to pay Walker the agreed upon amount. Walker sued, alleging claims based on quantum meruit and suit on account. The jury ultimately returned a verdict in his favor.⁸

On appeal, Wingate argued that the trial court erred in instructing the jury on both Walker's quantum meruit and commercial account theories given the existence of a written contract.⁹ The court of appeals disagreed noting that Georgia law permits a plaintiff to proceed to trial on alternative theories and that the evidence supported a possible finding that there had been no meeting of the minds between the parties and, thus, no contract between them.¹⁰

C. Merger; Assignment of Warranties; Selection of Remedies; and Seller's Duty to Disclose Known Defects

In Ainsworth v. Perreault,¹¹ plaintiff homebuyers brought suit against defendant sellers alleging fraud and breach of contract arising out of plaintiffs' purchase of defendants' home. Plaintiffs alleged that defendants made misrepresentations of material fact and concealed defects in the swimming pool. Plaintiffs also argued that defendants breached the sales contract by failing to transfer the warranty on the pool.¹²

In affirming the trial court's award of summary judgment to defendants, the court of appeals held that by electing to affirm the agreement, plaintiffs precluded their claim for willful misrepresentation because they had an option, either to "affirm the contract and sue for damages from the fraud or breach" or "rescind the contract and sue in tort for fraud."¹³ Regarding plaintiffs' claim that defendants committed fraud by failing to reveal on the disclosure statement material defects in the pool, the court of appeals held that there was no evidence that the parties incorporated the disclosure statement into the sales agreement and that the agreement contained a merger clause.¹⁴ The court also rejected plaintiffs' contention that defendants actively or passively concealed defects in the pool, noting that there was no evidence that defendants possessed knowledge of any existing defects.¹⁵ Lastly, the court rejected plaintiffs' claim for breach of contract based upon defendants' failure to transfer the warranty on the pool because such warranty by its terms was nontransferable, and defendants only agreed to transfer such warranties "which by their terms may be transferable to Buyer."¹⁶

D. Oral Settlement Agreement

In Robison v. George,¹⁷ George filed suit against Robison, alleging, among other things, breach of contract. The parties' dispute arose out of construction work George was to perform at Robison's residence. Pursuant to an oral agreement, George agreed to work for an hourly wage plus an additional ten percent of the labor expenses to cover insurance costs. Suspecting that George was submitting inflated invoices, Robison at some point stopped making payments and offered to pay George a reduced figure on the disputed amounts. George agreed to accept the reduced amount, and Robison tendered several checks totaling $20,925.76. When Robison did not receive back-up documentation to substantiate the reduced invoiced amounts, he stopped payment on all checks. George then brought suit against Robison alleging, among other things, breach of an oral settlement agreement. Robison counter-claimed for fraud, breach of contract, slander, conversion, and abusive litigation.¹⁸

Affirming the trial court's award of summary judgment to George on both his claim for breach of contract and on Robison's various counterclaims, the court of appeals explained that oral settlement agreements between parties are enforceable in Georgia.¹⁹ Therefore, the court held that Robison's breach of the settlement agreement excused any future performance that may have been required previously.²⁰

E. Accord and Satisfaction

In Hawthorne Grading & Hauling v. Rampley,²¹ a grading and hauling contractor appealed the trial court's award of summary judgment to defendant real estate developer. The dispute arose out of an oral agreement to clear certain rights-of-way in connection with a residential real estate development project. Hawthorne Grading & Hauling ("Hawthorne") began work on the project in the fall of 1998, but stopped work in March of the following year before the project was completed. Hawthorne billed Rampley, the real estate developer, $26,400 for costs associated with clearing and burning twelve acres.²² By letter, Rampley contested the invoiced amount, claiming that Hawthorne had cleared only 4.5 acres. Rampley, therefore, enclosed a check for a lesser amount of$10,000 with the words "full payment of all sums owed to Hawthorne."²³ Hawthorne subsequently endorsed the check "with reservations" and deposited it.²⁴ The trial court granted Rampley's motion for summary judgment on the basis of accord and satisfaction.²⁵

On appeal, Hawthorne argued that there could be no accord and satisfaction because Rampley first communicated his dispute over the amount claimed by Hawthorne contemporaneously with (instead of prior to) his tender of a lesser amount.²⁶ The court of appeals rejected Hawthorne's argument, holding that Hawthorne's acceptance of partial payment, with actual knowledge of the existence of a dispute over the total amount, constituted accord and satisfaction.²⁷ The fact that Rampley first communicated his dispute over the amount claimed due contemporaneously with his tender of a lesser amount, the court explained, was of no legal consequence.²⁸

F. EIFS: Accrual of Statute of Limitations

In Colormatch Exteriors, Inc. v. Hickey,²⁹ defendant builders constructed a house. The county finished all home inspections on April 26, 1995 and issued a certificate of occupancy in July 1995. Subsequently, defendant builders sold the property to plaintiffs, a husband and wife. The plaintiffs discovered moisture damage under the synthetic stucco cladding. On April 26, 1999, they sued defendant builders and the synthetic stucco manufacturer. Plaintiffs asserted product liability claims against defendant...