Florida’s Second District Court of Appeal recently reversed a $105,000 verdict in favor of a site development contractor, holding that the unpaid invoices did not arise under the contract. The case illustrates the importance of getting written change orders and choosing claims carefully, because, critically, there did not appear to be any dispute over the performance or quality of the work.
JD Development I, LLC v. ICS Contractors, LLC arose from a dispute between a developer and a site development contractor over payment of multiple invoices for work the contractor performed. The contract between the developer and the contractor consisted of a bid, based on a site plan and two subsequent revisions, which contained eight categories of work included in the bid and a list of exclusions. The bid also contained unit pricing that would be used to invoice the developer.
The site development contractor performed work pursuant to this contract for six months before the developer terminated the contractor from the project. At the time of termination, the contractor had completed three of the eight categories of work. The contractor submitted an account statement to the developer reflecting eight unpaid invoices and one partially paid invoice, for a total due of $182,827.15. After the developer failed to pay the account statement in full, the contractor sued, alleging claims of breach of contract, account stated, open account, unjust enrichment, and quantum meruit. The breach of contract claim was based on the developer’s failure to pay the account statement in full for work performed pursuant to the bid contract.
At trial, the contractor conceded that two of the invoices had been paid, leaving an amount due of $105,214.84. The president of the contractor testified that after the parties had agreed to the bid, there were additional revisions to the plans and resulting changes to the work performed by the contractor, but no amendments or changes to the contract between the parties. The president also testified that one of the invoices was based on work performed pursuant to a conversation at the site, and that several other invoices contained work that was performed pursuant to emails between the parties that noted that the work was outside scope of the contract.
At the close of the contractor’s evidence, the developer moved for an involuntary dismissal of the contractor’s breach of contract claim, arguing that the unpaid invoices did not contain work that was part of the contract and therefore the lack of payment of the invoices was not a breach of contract. The trial court denied the motion and the claims were submitted to the jury. The jury ultimately returned a verdict in favor of the contractor on its breach of contract count in the amount of $105,214.84.
The developer appealed the verdict to the Second District Court of Appeal which reversed the award on the breach of contract claim. In doing so, the Court first noted that
An essential element of a claim for breach of contract is the existence of a material breach of a contractual duty.
The court held that since the testimony and documents introduced at trial indicated that the work contained in the unpaid invoices was not part of the contract sued upon, the trial court had erred when it denied the motion to dismiss the breach of contract count. The Court also specifically stated:
Whether the parties may have orally agreed to the performance of those work activities or whether a written document other than the bid reflects the parties' agreement as to the performance of those work activities has no bearing on whether the trial court properly denied the motion for directed verdict on the breach of contract claim. [The contractor] pleaded a claim for breach of the written bid and proceeded under that legal theory at trial. And since no reasonable view of the evidence could sustain a verdict in favor of [the contractor] on its breach of contract claim -- even when viewing testimony and evidence in the light most favorable to [the contractor] -- we hold that the trial court erred in denying [the developer’s] motion for directed verdict with respect to this claim.
The end result was the reversal of the judgment in favor of the contractor and the entry of one in favor of the developer.
The obvious takeaway from this decision is that contractor’s need to get written change orders to cover work and to bring the work within the protections of their contract. A contract likely includes penalties or interest for late payments, and likely includes the ability to seek an award of attorneys’ fees as a prevailing party in a lawsuit to enforce the contract. Those benefits disappear if the work isn’t performed pursuant to a contract.
There are a few non-obvious takeaways here though, that should drive that point home even harder. Notice that there’s nothing in the opinion to suggest that the work wasn’t done, or wasn’t done properly. The only dispute the developer seemed to raise was that it wasn’t done pursuant to the contract. Why does that matter? Because if the developer can prevail on that argument (which it did), it can avoid paying the contractor’s attorneys’ fees and contract interest, and can likely seek an award of its own attorneys’ fees. It may end up having to pay the contractor under one (or more) of the other claims or theories, but it now has a setoff.
Put another way, prior to the appeal, the contractor had a $105,000 judgment in its favor, and likely the ability to add attorneys’ fees, costs, and interest to that judgment. Maybe that swelled the judgment to a total of $250,000.00. After appeal, assuming the contractor was still entitled to $105,000 on another of its non-contract claims (account stated, maybe), it may not be entitled to attorneys’ fees, and may only be entitled to minimal interest. Maybe the total judgment is now only $120,000.00. But, now the developer has prevailed on the breach of contract claim, and while it may not have any damages, it is likely entitled to an award of attorneys’ fees. If the developer spent $80,000 in attorneys’ fees, then the contractor now has a net judgment of only about $40,000.00, hypothetically.
This illustrates why it’s so critical not only to properly document work and changes, but also to properly litigate over it as well. This will help ensure that a winning claim doesn’t turn into a losing one.