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Monsen Engineering Co. v. Tami-Githens Inc.

Decided: June 29, 1987.


On appeal from Superior Court of New Jersey, Law Division, Hudson County.

Furman, Dreier and Shebell. The opinion of the court was delivered by Dreier, J.A.D.


Defendant Tami-Githens Inc. and its surety Ohio Casualty Insurance Co. have appealed from a Law Division decision in favor of the Jersey City Housing Authority (Authority) in a breach of contract action. The Authority has cross-appealed from a ruling limiting it to the liquidated damage provisions in its contract.

This case involves a contract for the installation of a computerized zone-controlled energy management system in a public housing complex. Plaintiff, Monsen Engineering Co. (Monsen), a sub-contractor of Tami-Githens, originally asserted causes of action against both Tami-Githens and the Housing Authority for breach of contract, violations of the municipal mechanics lien law, wrongful appropriation, conversion and unjust enrichment. Monsen settled with Tami-Githens, and its complaint against the Authority was dismissed by an order that also limited the Authority to recovery against Tami-Githens of the liquidated damages specified in the prime contract. After an eight-day trial, the court entered final judgment in favor of the Authority and against Tami-Githens and its surety in the amount of $160,000 pursuant to the liquidated damage clause.

The energy management system installed by Tami-Githens was to provide automated heating control throughout an extended multi-building public housing complex by the use of telemetric remote temperature sensors linked by computer and mechanical components. Sensors were to be located in five dwelling units per building and would communicate the data by means of the existing 110 volt electrical wiring to a data processor located in each building which also would be wired to various other sensors in the heating system. The building data

processor would control and monitor the heating system of the particular building and then would be wired underground to a Centrex unit located in each of seven central boiler rooms. The Centrex units would be themselves linked over telephone lines to the main system computer located in the Authority's central office. Centrex units would also be monitored by black and white video cameras with the main system in the computer office.

The contract was awarded in April 1982 at a contract price in excess of $1,000,000. Work changes by Tami-Githens required a written change order from the Authority and the work was to be completed within 150 days. The contract contained a liquidated damage clause by which Tami-Githens agreed to pay to the Authority "liquidated damages (it being impossible to determine the actual damages occasioned by the delay)" of $200 for each calendar day of delay beyond the 150 days allowed for completion. The completion time was designated an essential condition of the contract. Performance commenced on April 28, 1982. Based upon this date, the contract should have been completed September 25, 1982. The contract was not considered substantially completed until December 31, 1984.*fn1 The total time of the delay less permissible extensions amounted to 800 calendar days.*fn2

Under the contract Tami-Githens was "fully responsible" for the installation of the overall system and was presumed familiar with "the plans and contract documents (including all addenda)." Electrical and mechanical products specifications were detailed in the contract. Specifically, each building was to be furnished with five "[p]ortable remote room temperature sensors," with specific instructions for their installation. Tami-Githens was further responsible "to provide a complete and operating installation as described by the plans and specifications."

On April 26, 1982, Tami-Githens subcontracted with Monsen for the computer and electrical requirements at a subcontract price of approximately $412,000. Although Monsen was aware that Tami-Githens' contract with the Authority called for telemetric sensors, the subcontract stated that there had been included a price of $20,000 "for hard wiring of room sensors to satisfy the contract documents." It was further provided that if the hard wiring could be eliminated by substitution of telephone lines, the savings was to be divided equally between Monsen and Tami-Githens.

There appeared to be a bona fide dispute as to whether or not the remote sensors were available in the market as of the date of the contract. Monsen allegedly had asked an Authority official about such availability and was told that the official had seen something about remote sensors in a magazine. Consistent with its subcontract, Monsen recommended telephone wiring for the sensors, but the Authority found this proposal "totally absurd" in light of the base contract's specifications and projected additional costs for wiring. This occasioned several months of delay while the Authority and Monsen sought a source of remote sensors. In October 1982, Authority

officials located a manufacturer of the sensors which had been on the market at least since January 1982, and the manufacturer provided the Authority with demonstrations in December 1982 and January 1983 after which the majority of the Authority concluded that the technology was feasible and available at the time of contract. Monsen, however, replied to the Authority's demand by stating that the remote sensors were incompatible with the building data processing units that Monsen had already procured and, since Monsen was a licensed distributor of the manufacturer, the data processing units' manufacturer's approval was needed to change the equipment. The Authority proceeded to perform on-site tests and determined that the sensors were compatible with the data processing units, and in March 1983 Monsen conceded the suitability of the telemetric sensors and offered the Authority alternative plans.

Tami-Githens, however, insisted that the telemetric option would require an additional cost of $150,000 and that the system was an "extra," since it was not available at the time of the original contract. After further negotiations, the Authority and Tami-Githens agreed to forego the telemetric sensors in favor of hard wiring. They memorialized their agreement in Change Order No. 5 which expressly provided for no changes either in contract price or time. The Authority accepted this compromise to facilitate the completion of the contract, although Monsen still required six to eight months thereafter to complete the work required by the Change Order.*fn3

As to the other four Change Orders Nos. 1 through 4, they allowed in total time extensions of 27 days. At no time had Tami-Githens requested ...

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