Jose A. Aquino – Duane Morris Construction Law

October 2, 2024October 2, 2024 by Jose A. Aquino

The Importance of Written Agreements: Insights from a Recent Court Decision

In a recent decision, Hopwood v. Infinity Contracting Services Corp., a New York appellate court addressed the application of the statute of frauds in a dispute concerning compensation for negotiating business opportunities. The plaintiffs alleged that Infinity Contracting Services Corp. (“Infinity”) had failed to honor an oral agreement to pay a commission for securing a contract with the New York City Department of Education (“DOE”). According to the plaintiffs, Infinity’s CEO had verbally agreed to pay them 5% of the contract’s value for their role in procuring the DOE contract. However, Infinity allegedly failed to fulfill this promise, prompting claims for breach of contract and unjust enrichment.

At the trial level, the court granted Infinity’s motion for summary judgment, dismissing the breach of contract and unjust enrichment claims on the basis that they were barred by the statute of frauds. This legal doctrine requires that certain agreements, including those involving compensation for negotiating business opportunities, be in writing and signed by the party to be charged. The appellate court upheld the dismissal, finding that the emails presented by the plaintiffs were insufficient to satisfy the statute of frauds, as they lacked the essential terms of a binding agreement.

For a writing to comply with the statute of frauds, it must designate the parties involved, describe the subject matter, and set forth all essential terms necessary to form a complete agreement. In this case, the court concluded that the emails did not meet these requirements, and as a result, the plaintiffs’ claims for breach of contract and unjust enrichment could not proceed.

This decision highlights the importance of putting business agreements in writing to ensure enforceability. The New York Statute of Frauds, codified in General Obligations Law § 5-701, requires that certain agreements be in writing and signed by the party to be charged in order to be enforceable. These include agreements that cannot be performed within one year, contracts involving real property, promises to answer for the debt of another, agreements made in consideration of marriage, promises to make a testamentary disposition, contracts for the sale of goods over $500, and agreements to pay compensation for negotiating a business opportunity.

This case serves as a reminder of the limitations of oral agreements and the potential pitfalls associated with failing to comply with statutory requirements. By ensuring that agreements are properly documented in writing, parties can avoid disputes, establish clear expectations, and safeguard their rights.

Jose A. Aquino (@JoseAquinoEsq on X) is a special counsel in the New York office of Duane Morris LLP, where he is a member of the Construction Group and of the Cuba Business Group. Mr. Aquino focuses his practice on construction law, lien law and government procurement law. This blog is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this blog are those of the author and do not necessarily reflect the views of the author’s law firm or its individual attorneys.

September 23, 2024September 24, 2024 by Jose A. Aquino

APPELLATE COURT REJECTS UCC ADEQUATE ASSURANCE CLAIM IN CONTRACT DISPUTE

A recent New York appellate court opinion, Dreamco Development Corp. v. Cranesville Block Company, Inc., provides valuable insight into the application of the Uniform Commercial Code (UCC) and the concept of “adequate assurance of performance.”

The case centered on a one-page “independent contractor and consultant” agreement. Under the contract, the plaintiff was responsible for selling a minimum quantity of concrete on behalf of the defendant in exchange for monthly payments. However, midway through the contract term, the defendant stopped making these payments and ultimately terminated the agreement. The defendant claimed that the plaintiff had sold less than 10% of the required minimum and failed to provide adequate assurance that the remaining amount would be sold before the contract’s expiration.

The key legal issue was whether the defendant was justified in demanding “adequate assurance of due performance” under UCC § 2-609(1). Under the UCC, a party to a contract can demand adequate assurance from the other party if they have reasonable grounds for insecurity regarding performance. If such assurance is not provided, the party may treat the contract as repudiated. However, the UCC applies only to contracts primarily for the sale of goods.

The court found that the plaintiff’s role was to sell concrete, a service, rather than to buy or sell goods. Because the contract was service-oriented and not predominantly for the sale of goods, the UCC did not apply. As a result, the defendant’s demand for adequate assurance was unjustified, and their failure to make the agreed-upon monthly payments constituted a breach of contract.

This ruling underscores the importance of identifying the nature of a contract’s obligations and determining whether the UCC governs the agreement. It also highlights the need for parties to define their roles and responsibilities to prevent future disputes.

September 5, 2024September 5, 2024 by Jose A. Aquino

Court Emphasizes Strict Compliance in Construction Contracts

In a recent ruling, a New York appellate court sided with a contractor in a dispute over a 33-story building project.[1] The contractor initially hired a subcontractor to supply equipment for the project, but the subcontract was later assigned to another entity. Shortly thereafter, the contractor alleged breaches of the subcontract, terminated the agreement, and took possession of the equipment. The contractor then filed a lawsuit seeking compensation for delays and additional costs resulting from the defendants’ defective work. In response, the defendants counterclaimed for breach of contract and sought foreclosure of mechanic’s liens. They also filed a third-party claim against the property owner and its surety, seeking to foreclose on the liens.

The court dismissed the defendants’ counterclaims and third-party claims, highlighting the defendants’ reliance on unsigned and unnotarized requisitions and change orders, which failed to meet the contractual requirements. The court citing precedent underscored that payment requisitions must be both signed and notarized, and that change orders must be formally documented and mutually approved in strict compliance with the terms of the contract.[2]

Additionally, the court found that the contractor had provided sufficient evidence to support its claims for delay damages. The contractor presented documentation detailing additional work performed by other vendors, as well as payments made to replacement subcontractors, due to the delays attributed to the defendants. The court found that such evidence raised genuine issues of material fact regarding the impact of the defendants’ actions on the project’s timeline and costs, prompting the court to deny the defendants’ motion for summary judgment on this issue.

The court also rejected the defendants’ claims for unpaid equipment rental, as they were unable to demonstrate that the proposed monthly rental rates had been agreed upon. The subcontract specified only a 12-month rental period, and the defendants could not provide evidence of any additional rental terms beyond that period.

This decision highlights the importance of adhering to contractual documentation and approval processes in construction projects. It serves as a reminder to contractors and subcontractors alike to ensure that all requisitions and change orders are properly signed, notarized, and approved to avoid disputes and potential legal challenges. Furthermore, the ruling underscores the necessity of maintaining thorough records and evidence to substantiate claims for damages and delays. The court’s decision reinforces the judiciary’s commitment to enforcing strict compliance with agreed upon contract terms.

[1] Hudson Meridian Construction Group LLC v. Bayport Construction Corp., 228 A.D.3d 531, 215 N.Y.S.3d 78 (1st Dept. 2024)

[2] F. Garofalo Elec. Co. v. New York Univ., 270 A.D.2d 76, 80, 705 N.Y.S.2d 327 (1st Dept. 2000), lv dismissed 95 N.Y.2d 825, 712 N.Y.S.2d 450, 734 N.E.2d 762 (2000); Martin Iron & Constr. Corp. v. Howell Co., 242 A.D.2d 608, 609, 664 N.Y.S.2d 746 (2d Dept. 1997).

August 25, 2024 by Jose A. Aquino

New York NY Court Dismisses Construction Defect Case Over Statute of Limitations

The New York Appellate Division, Second Department, recently affirmed the dismissal of a breach of contract lawsuit related to alleged construction defects.[1] The plaintiff claimed that the defendant had breached their remodeling contract by improperly installing flooring in the plaintiff’s basement. However, the appellate court affirmed the lower court’s ruling that the plaintiff’s claim was barred by the statute of limitations.

Under New York law, breach of contract claims are subject to a six-year statute of limitations.[2] This limitations period begins to run upon the contractor’s completion of the work. In this case, the court determined that the claim accrued on May 26, 2015, the date on which the plaintiff made the final payment under the contract, with no subsequent work performed. The plaintiff filed the lawsuit on January 21, 2022, well beyond the six-year statutory period.

The court also considered the potential tolling of the statute of limitations due to executive orders issued during the COVID-19 pandemic. However, even with these tolling provisions, the court found the plaintiff’s action untimely. Consequently, the lower court’s dismissal of the complaint was upheld on appeal.

In affirming the lower court’s decision, the Appellate Division emphasized that the burden rests with the defendant to establish that the statute of limitations has expired. Once this burden is met, the plaintiff must then demonstrate a factual basis for tolling the statute of limitations or show that the claim was filed within the statutory period. In this case, the plaintiff failed to present a factual issue that could preclude dismissal, resulting in the affirmation of the dismissal the complaint.

The ruling underscores the critical importance of understanding and adhering to the statute of limitations in construction-related disputes. It also highlights the necessity for plaintiffs to act promptly when they believe they have a claim, as delays can easily result in losing the right to sue.

[1] Hillaire v. Jose A. Torres, ___ N.Y.S.3d ___, 2024 WL 3281628 (2d Dep’t 2024).

[2] N.Y. C.P.L.R. § 213(2)

August 6, 2024August 7, 2024 by Jose A. Aquino

Equitable Subrogation: Insights Into Legal Complexities In Recovery

The principle of equitable subrogation plays a central role in ensuring that the party responsible for causing loss or damage is held accountable. This doctrine allows an insurer, who has compensated the insured for a loss, to assume the legal rights of the insured to seek recovery from the third party responsible for the loss.

The recent decision of New York Municipal Insurance Reciprocal v. Stewart’s Shops Corporation, 228 A.D.3d 1116, 212 N.Y.S.3d 859 (3d Dep’t 2024), presents a scenario involving property damage, insurance claims, and the intricacies of equitable subrogation. In 2016, Stewart’s Shops Corporation acquired properties with the intention of constructing a new store. The development required the removal of an underground fuel storage tank and contaminated soils, a task undertaken by its contractor. However, the remediation project led to structural damage in a neighboring building owned by the Village of Middleburgh.

In response to the damage, the Village’s insurance company initiated a subrogation action against both Stewart’s and its contractor. The defendants countered by moving for summary judgment challenging plaintiff’s standing. Defendants noted the absence of payment under the policy prior to the commencement of the action and argued that any future attempt to do so was barred by the statute of limitations.

The lower court’s decision to deny the defendants’ motion for summary judgment was reversed on appeal. The appellate court held that the insurer for the owner of a building damaged by a contractor’s work on adjacent property lacked standing to bring a claim as the owner’s subrogee. This was because standing accrues only upon payment of the loss, and the insurer filed suit before making any payments. According to established precedent, an insurer’s right to subrogation arises upon payment of the loss, which must be directed toward satisfying an actual claim rather than a potential liability. This right arises independently of any contractual agreement between the insurer and the insured.

The appellate court’s ruling underscores that the insurer, as an equitable subrogee, is subject to the same defenses that could have been raised against the insured, including the statute of limitations.

The case serves as a reminder of the legal complexities surrounding equitable subrogation. It highlights the importance of timely payment by insurers to secure their subrogation rights.

July 30, 2024July 31, 2024 by Jose A. Aquino

Revisiting The Intricacies Of New York Lien Law § 38

In the realm of construction law, disputes over the enforcement and validity of mechanic’s liens are fairly common. The recent case of 176 Washington Park LLC v. Empire Core Group LLC, 2024 N.Y. Slip Op. 50906(U) (Sup. Ct., NY Co., June 21, 2024), serves as a classic illustration of the complexities involved.

New York Lien Law § 38 is clear in its mandate: a lienor must provide a detailed statement of the labor and materials that constitute the claimed lien amount. This includes a comprehensive breakdown of materials used, their quantities, costs, and the specifics of labor, including the nature of the work, hours spent, and the rates charged.

In 176 Washington Park LLC v. Empire Core Group LLC, the defendant’s submission fell short of these requirements. The court found the provided classifications of costs, such as “Porta Potty,” “Construction Site Signs,” “Waste Removal,” “DOB Drawings,” and “DOT Permits,” to be too general. They lacked the necessary detail regarding the nature of the labor and the hours and wages expended. Furthermore, payments to subcontractors were listed without adequate information about the services rendered or the basis for the charges.

The materials section was similarly lacking, with no specifics on the quantity or costs of materials used, despite listing the suppliers and amounts disbursed. This lack of detail ultimately led to the court’s decision to grant the plaintiff’s motion in part, requiring the defendant to provide a proper verified itemized statement within 30 days. Failure to comply would result in the discharge of the mechanic’s lien.

This case underscores the importance of record-keeping and transparency in construction projects. It emphasizes the need of contractors and subcontractors to adhere to the requirements of Lien Law § 38 to ensure the enforceability of their liens.

January 12, 2023January 12, 2023 by Jose A. Aquino

New York Announces Investments In Clean And Efficient Buildings

Yesterday, New York Governor Kathy Hochul announced new investments in clean and efficient buildings. As part of her 2023 State of the State, Governor Hochul introduced a series of building decarbonization initiatives, including zero-emission for new construction and the phase out of the sale of new fossil fuel heating equipment.

“I’m proposing a plan to end the sale of any new fossil-fuel-powered heating equipment by 2030,” said the governor. “And I’m calling for all new construction to be zero-emission, starting in 2025 for small buildings and 2028 for large buildings. We are taking these actions because climate change remains the greatest threat to our planet, and to our children and grandchildren.”

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January 3, 2023 by Jose A. Aquino

New York Court Rejects Building Owner’s Motion For Default Judgment Against Subcontractor And Architect

A recent decision of the New York Supreme Court, LAM Group v. Anthony T. Rinaldi LLC, 2022 WL 17881264 (Sup. Ct., NY Co., Dec. 22, 2022), illustrates the importance of meticulously following the procedures set forth in civil practice statues and rules. In LAM, the owners of a commercial building in lower Manhattan brought an action against their contractor, a subcontractor, and other construction professionals alleging breach of contract, negligence, and other claims in connection with the installation of a stucco façade on their property.

Plaintiffs alleged that pieces of the stucco façade from the exterior of the building dislodged and landed on a neighboring property causing damage. Eventually, the entire stucco façade required replacement. Defendant Bayport Construction Group (“Bayport”), a subcontractor, had performed the masonry and stuccowork. Bayport and another defendant, Nobutaka Ashihara Architect PC (“NAA”), the initial architect retained for the project, were served with the summons and verified complaint by service on the New York Secretary of State, pursuant to New York Business Corporation Law § 306(b). However, neither Bayport nor NAA filed an answer or otherwise appeared in the action. Plaintiffs filed a motions for default judgment against the two non-appearing defendants. The court found that plaintiffs properly served Bayport and NAA with process and with the motion papers, but refrained from entering a default because plaintiffs failed to strictly follow the procedure set forth in the New York Civil Practice Law and Rules (“CPLR”).

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January 3, 2019 by Jose A. Aquino

NY Governor Vetoes Bill To Allow Delay Damages On Public Contracts

New York Governor Andrew Cuomo ended 2018 by vetoing New York Senate Bill 6686 to amend the state finance law by adding a new section 138-b to allow contractors working on public construction projects seek delay damages against government agencies. The vetoed bill would have required all public contracts to contain a clause allowing a contractor, subcontractor or supplier to make a claim for costs due to excusable delays resulting from actions or omissions by a public owner or any of its representatives. The bipartisan bill sponsored by Senators Michael Ranzenhofer (Republican) and Luis Sepulveda (Democrat) passed the Assembly by a vote of 103 to 40 and the Senate 59 to 0. The text of the bill can be seen here.

Jose A. Aquino (@JoseAquinoEsq on Twitter) is a special counsel in the New York office of Duane Morris LLP, where he is a member of the Construction Group and of the Duane Morris Cuba Business Group. Mr. Aquino focuses his practice on commercial litigation with a concentration in construction law, mechanics’ lien law and government procurement law. This blog is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this blog are those of the author and do not necessarily reflect the views of the author’s law firm or its individual attorneys.

December 3, 2018December 3, 2018 by Jose A. Aquino

Major Milestone Reached in Phase II of New York City’s Second Avenue Subway Project

The Metropolitan Transit Authority (MTA) announced that the Federal Transit Administration issued a “Finding of No Significant Impact” (FONSI) for Phase II of New York City’s Second Avenue Subway Project. The FONSI was issued after an extensive update of the original Environmental Impact Statement that was prepared in 2004. The new findings mean changes to the design of the project since 2004 were found to have no additional adverse impact on the environment in the construction area.

Congresswoman Carolyn B. Maloney said: “This finding is a major step forward toward making Phase 2 of the Second Avenue Subway a reality,” “Phase 2 will make it much easier to commute to and from East Harlem, and to access Metro North and the LaGuardia bus at 125th Street. We have already seen the extraordinary success of Phase 1, and the MTA must move forward as quickly as possible to build the full-length Second Avenue Subway up to 125th Street and then down to lower Manhattan.”

Phase I of the Second Avenue Subway opened for service January 1, 2017. Phase II is now underway with engineering and environmental reviews. Phase II will extend the subway line to 125th Street with stops at 106th, 116th, and 125^th. When completed, the Second Avenue Subway Line will extend 8.5 miles from 125th Street in Harlem to Hanover Square in Lower Manhattan, including 16 new ADA-accessible subway stations.