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Borough of Atlantic Highlands v. Eagle Enterprises Inc.

June 16, 1998

BOROUGH OF ATLANTIC HIGHLANDS, PLAINTIFF-APPELLANT,
v.
EAGLE ENTERPRISES, INC., DEFENDANT-RESPONDENT.



Before Judges Long, Kleiner and Kimmelman.

The opinion of the court was delivered by: Kimmelman, J.A.D.

[9]    Argued May 27, 1998

On appeal from the Superior Court of New Jersey, Chancery Division, Monmouth County.

At issue is whether a clause evidencing an agreement to arbitrate all claims arising out of or related to the parties' construction contract remained viable after the parties entered into a subsequent agreement acknowledging that the construction contract was completed, that the subsequent agreement "constitute[d] full and final satisfaction of all claims for compensation," and that "neither party ha[d] any further claims for compensation or damages against the other," subject only to the retainage being held pending satisfactory completion of certain repair items.

The trial court held that the subsequent agreement between the parties did not abrogate the initial arbitration clause. The application to enjoin arbitration commenced by defendant on its change order claim for extra work was denied and plaintiff's complaint was dismissed with prejudice. We reverse.

I.

On December 29, 1995, following public bidding, plaintiff and defendant entered into a construction contract, whereby defendant agreed to construct a new emergency services building for $959,700. February 4, 1996, was the date set for commencement of construction, with substantial completion to be effected not later than 240 calendar days (eight months) after commencement. Liquidated damages were fixed at "$500 for each and every calendar day" that substantial completion of the work overran the contract time.

The deadline was not met. Defendant places blame for the delay on plaintiff's architect. It was not until February 28, 1997, or more than four months after the contract completion deadline, that the building was substantially completed. At that point, several matters between the parties remained unresolved and outstanding, such as: plaintiff's damage claim for delay; payment for work already completed and billed; the payment of the architect's site inspection fees; and payment for change orders #1 through #12, for which claims had already been made in accordance with the general terms and conditions of the contract.

As several months dragged by without resolution of these matters, defendant became hard-pressed for funds, and plaintiff continued its threats to assess approximately $60,000 as damages for the delay in construction. Finally, the parties sat down and resolved their differences, resulting in the preparation and execution of a "Final Agreement" on June 5, 1997, which reads as follows:

The Borough of Atlantic Highlands and Eagle Enterprises hereby agree that the $12,500 deduction (credit) in favor of the Borough is in full settlement of any and all claims by either party for damages by reason of delay or late completion of the project. Subject only to the $10,000 retainage being held by the Borough pending the satisfactory completion of certain repair items by Eagle, the parties agree that Contract is completed and this Agreement constitutes full and final satisfaction of all claims for compensation and neither party has any further claims for compensation or damages against the other.

The parties agree that the amount of $10,000 is being withheld from the final payment, to be held as retainage pending the completion by Eagle to the reasonable satisfaction of the Borough Administrator of the following listed outstanding repair items. Upon satisfactory completion of these items, the $10,000 retainage will be released to Eagle within 14 days.

REPAIR ITEMS

1. Roofing and siding shingles (replacement ...


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