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P.T. & L. Construction Co. v. State

Decided: October 19, 1987.


On certification to the Appellate Division, Superior Court.

For affirmance -- Chief Justice Wilentz, and Justice Clifford, Handler, Pollock and O'Hern. Opposed -- None. The opinion of the Court was delivered by O'Hern, J.


We granted certification, 105 N.J. 517 (1986), primarily to consider the respective contentions of the State and a public contractor that the decision below so far departed from settled legal principles as to call for exercise of our appellate supervision. The State contends that the Appellate Division judgment, allowing damages to the contractor for delay attributable to unexpectedly wet site conditions, erred in two respects: (1) it allowed recovery on a theory of "implied warranty" specifically precluded by the New Jersey Contractual Liability Act, N.J.S.A. 59:13-1 to -10; and (2) it refused to give effect to the "no damage for delay" provisions of the contract that specifically disclaimed liability for delays caused by differing site conditions, thereby conflicting with three recent reported decisions of the Appellate Division. The contractor contends that the Appellate Division erred in giving force and effect to one aspect of the "no damage for delay" provision when it refused to allow damages for delay occasioned by the work of other contractors that hindered the plaintiff's performance.

We find that there is a sufficient factual basis to sustain the trial court's finding that the State's nondisclosure of material facts constituted a misrepresentation of site conditions for which recovery may be allowed. The general exculpatory clauses of the contract disclaiming responsibility for differing site conditions do not apply in the face of such a finding. We note, however, that had the plaintiff's claim been premised only

on its conclusion that dry working conditions were implicit in the contract specifications, recovery would have been precluded by the specific disclaimers of State responsibility for site conditions. There is a critical distinction between a claim based on the State's implying that conditions would be dry and a claim founded on the State's withholding information that conditions would be wet.

We also find that claims for damages attributed to delays in utility relocation were precluded by the terms of the contract. Hence, we affirm the judgment of the Appellate Division, which disallowed $240,768 in contract extras for the utility delays sought by plaintiff, but did allow recovery of $1,243,861 for the misrepresentation of site conditions.


We shall state only the facts relevant to the issues that we address. The case involves a substantial contract for a small section of Interstate Route 78 as it passes through the heavily built-up areas of Union County in Springfield, New Jersey. It involves 1.4 miles of construction where the new multi-lane super-highway is cut under two heavily traveled local roads, Vaux Hall Road and Burnett Avenue. The contract has this added feature: it involves a joint venture. Generally, this plaintiff was to do such tasks as cite clearance, underground and roadway work; the other contractor, Ell-Dorer Contracting Co., was to do the bridge construction.

At the work site, the south side of the road is bordered by single-family dwellings, the north side by mixed uses, primarily residential but including a large commercial development with paved parking areas. The reader should try to visualize an east-west cut within this built-up area with an existing downward slope to the west. The plan was to move extra soil from the east end of the project to the west end, to provide drainage both along and across the roadway, to bridge the super-highway for the two local roads, to finish the grade, and to pave the

divided super-highway. Obviously, such a contract is vastly more complex than this description, given here only to provide a background for the dispute.

The contract was awarded on October 31, 1972, for a bid price of $9,337,584.45. Plaintiff and Ell-Dorer commenced work on November 8, 1972. The contract called for completion by November 15, 1974. The contract was not completed until June 11, 1976.

According to plaintiff's witnesses, the job was plagued from the start by poor working conditions. The project foreman said that following the first heavy rain, water collected on the site, sometimes leaving the west end fill site three to four feet under water. This collection of water was attributed to varied site factors to be discussed in detail later. It was this watery condition that made the roadway excavation material too porous to serve adequately as fill material for the bridge embankments and road bed, thereby "creat[ing] a problem as far as making [the] fills." In an attempt to drain the area, plaintiff built a temporary ditch before beginning construction of the box culvert required by the contract plans.*fn1

Plaintiff's experts testified that stripping 9.87 acres an average depth of two feet required almost ten times the amount of such stripping called for in the contract, and took 171 days to complete rather than the three days originally allocated to the job. In short, plaintiff contended that the State, through the contract process, had misled it into believing that it would be working under dry or normal working conditions by use of the term "stripping."

On the utility relocation issue, there was conflicting testimony about the degree to which the poor coordination of the utilities work hindered the completion of the project. Plaintiff contended that the utility delays stalled the project for four months.

Both P.T. & L. and the State claimed compensation for the delays. The State invoked its liquidated damage clause of $300.00 per day.*fn2 As noted before, P.T. & L. claimed that the delays were caused by the State in that the State misrepresented conditions at the site and caused utility delays. Although in March 1979, P.T. & L. filed a complaint for breach of contract against the State Department of Transportation (because the principles applied are equally applicable to the State and DOT, we use the terms State and DOT interchangeably), it first submitted its claims to the DOT Claims Committee pursuant to the terms of the contract.*fn3 In July 1979, the parties entered a consent order staying proceedings pending the Committee's decision. The matter was restored to active status when the Committee denied relief in January 1980. This was also apparently one of the first projects constructed under the "Critical Path Method" (CPM) by which computerized work schedules may be adjusted to cope with delays, a factor emphasized in the proofs but not essentially relevant to the legal issues we address. We shall first discuss the opinion and judgments of the courts below and then consider separately the design-deficiency misrepresentation claims and the utility delay claims.


In an oral opinion, the trial court found the DOT liable for material misrepresentations of conditions at the west end, and

for utility delays and change orders. Specifically, it held that: the eighteen-inch stripping should have been labeled as wet excavation; the plans should have called for Zone 2 instead of Zone 3 fill material; the DOT's failure to inform plaintiff of the absence of drainage in the area was a material misrepresentation; the plans should have included construction of a cofferdam and a stone base for the culverts; and finally, DOT's withholding of certain information constituted a "misrepresentation if not a fraud." The court found that the material misrepresentations were not covered by the exculpatory or no-damage-for-delay clauses. With respect to the utility delays, the court found that the DOT had a duty to coordinate the activities of the utilities and therefore was liable for its breach in this regard because the exculpatory clauses of the contract covered only delays "within the contemplation of the parties." The trial court awarded plaintiffs $1,484,638 in delay damages.*fn4

The Appellate Division affirmed the judgment in all respects except one: it upheld the exculpatory clause as "efficacious in

the circumstances of the utility delays." Thus, it disallowed $240,768 of the damage award attributable to those delays.*fn5

In this opinion, we shall not address in detail the essentially factual resolution of how the various aspects of DOT's actions affected P.T. & L.'s performance. We shall resolve primarily the underlying legal principles and accept the findings of fact made by the courts below.


The portion of the trial concerning the west end delay issues revolved primarily around four contentions set forth in P.T. & L.'s brief:

(1) the Contract item for 18-inch average depth "stripping" was improperly designated as such in view of the extensive water problem existing in the west end; the work should have been described to bidders as "wet excavation";*fn6

(2) the Contract called for the use of Zone 3 fill material, excavated from the Project site, in the roadway embankments to be constructed in the west end, thereby clearly indicating dry conditions since both the DOT's Standard Specifications and accepted engineering practice require the use of more porous Zone 2 fill material in or under water;

(3) the Contract (P-1, Sheet 18) indicated by way of both a pictorial description (i.e., an arrow) and the use of the word "flow" that a branch or tributary of the East Rahway River which traversed the Project would furnish the drainage facilities required for the west end of the Project, when, in fact, there was no drainage for the area; and

(4) the Contract did not specify either the construction of a cofferdam around the culvert to be built through the west end, or the placement of a stone base underneath the culvert, both of which are ordinarily required when a culvert is to be built under wet conditions.

These contentions illustrate the inevitable polarity of public contracting.

Disputes are inherent in the construction of public works projects. A tension exists between the state and the contractor who ...

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