On appeal from the Superior Court, Appellate Division.
For affirmance -- Chief Justice Vanderbilt, and Justices Case, Oliphant, Wachenfeld, Burling and Ackerson. For reversal -- None. The opinion of the court was delivered by Wachenfeld, J.
On petition we granted certification to review a final judgment entered in the Appellate Division affirming a judgment in the Law Division wherein the contractor recovered moneys from the owner under a cost-plus-percentage construction contract entered into by the parties.
In the written contract the respondent is referred to as the contractor and that designation, for the sake of clarity, will be employed here, while the appellant will be termed the owner.
The contractor agreed to erect and finish a building and apartments consisting of 15 units called Building No. 2 on the plans and according to the drawings and specifications of the architect designated in the agreement. He was also obligated to "find and provide such good, proper and sufficient materials of all kinds whatsoever, as shall be proper and sufficient for the completing and finishing all the said apartments and buildings. * * *"
The owner agreed to pay to the contractor "the cost of the erection of said Building No. 2, as the same costs the contractor and to pay in addition to said cost the sum equal to 10% of the aforesaid total cost as the profit to said contractor." A provision for payment at a particular time for
the payroll of all persons actually engaged on the project was not in dispute. The payment for the materials was specified thusly:
"The contractor shall present to the owner on the first day of each month a complete list of all materials furnished in the course of construction on said building for the preceding month. The owner shall thereupon, prior to the 10th of such month, pay to the contractor the total represented by all the bills for the materials furnished, less all discounts allowed to said contractor and less all discounts that said contractor will be entitled to for having said bills paid prior to the 10th of such month."
Paragraph 4 merely provided for the payment of the cost of all insurance carried on the project during the course of construction, while paragraph 5 recited:
"After such building has been completed and a certificate of completion obtained the parties hereto shall compute the total actual cost of said building, whereupon the owner shall pay to the contractor 10% of such total cost to represent their profit in the matter of the construction of the aforesaid."
Paragraph 7 gave the owner the option of obtaining the materials from other sources if he thought he could secure them at a lesser price, after informing the contractor to that effect; while paragraph 9 gave the owner, "should he feel that the prices charged for labor or materials are excessive or that the conduct of any person or persons working under the supervision and direction of said contractor are doing or committing anything that he deems improper," the right to cancel the contract upon notifying the contractor. Then follows the controversial clause:
"If such event takes place the parties hereto shall compute the total cost of construction and labor up to that date, and to pay 10% thereof to the ...