On appeal from Superior Court of New Jersey, Law Division, Hudson County, L-4199-98.
Before Judges Kestin, Fall *fn1 and Weissbard.
The opinion of the court was delivered by: Weissbard, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
In this breach of contract case, plaintiffs, V.A.L. Floors, Inc. (VAL) and 3L Company, Inc. (3L) appeal from summary judgment granted in favor of defendant Westminster Communities, Inc. We are required to determine whether a contractor's profit estimate based on its past experience is a sufficiently definite basis upon which to submit a damage claim to the jury. Because we conclude that such an estimate amounts to more than just speculation, we reverse.
Westminster is the owner of the "Villas at Harbor Island" (Villas) in West End, NJ. In July of 1997, VAL, a flooring subcontractor, learned of a project at the Villas to install and upgrade flooring materials in individual units. VAL began to prepare a base bid for the fifty-five units at the Villas. VAL employees solicited bids from subcontractors and suppliers of materials over the phone in order to obtain prices needed for the bid. According to VAL, this type of price solicitation is common among contractors in the construction business. VAL took the prices that it obtained from the phone solicitations and transferred them onto cost analysis sheets. In her certification, Linda Luppino *fn2 explained the process:
Plaintiffs then obtained costs for the labor to be utilized on the Project based upon standard union rates at that time for each of the various disciplines who would be installing the different materials at the Project. These costs were translated, based on our experience, into units of work per man/hour in order to come up with the gross labor costs. In other words, we estimated not only the total labor cost for the base project, but also the per unit cost for each type of material to be installed in each type of unit. These costs were then also transferred to the cost analysis sheets.
Based on these prices, VAL "determined what markup or profit it would seek in preparing its base bid of $443,000," which it submitted in September 1997. Again, this method of arriving at the base bid price was that customarily followed by VAL in the past and by other subcontractors.
Up to this point in time, 3L had not been incorporated. Its incorporation, however, was in the process at the time and VAL intended that 3L would work with it on the project as a joint venture.
In September of 1997, shortly after the bid was submitted, Westminster contacted VAL and informed it that Westminster was accepting VAL's bid. The parties reached a verbal agreement that VAL would perform the work set out in its bid. Luppino's certification explained what happened next:
VAL and 3L then commenced discussion with representatives of Westminster concerning various upgrade programs which would be offered to prospective unit purchasers in lieu of the base materials. The costs for these upgrade programs were obtained and prepared in the same fashion as those for the base contract work. At that time it was our opinion, based upon past experience, that there would probably be approximately $232,000 worth of upgrades for the Project bringing the total contract amount to at least $675,000. As upgrade work is highly profitable in comparison to base contract work, it was our feeling that we would make at least a 33% overall profit on the job, or $235,000.
VAL and 3L were issued numerous construction work orders for various units by Westminster in February and March of 1998. According to the Luppino certification,
[a]dditionally, plaintiffs constructed on site a showroom containing samples of base grade items and the various upgrades of flooring materials which would be available to prospective purchasers of the units. Plaintiffs expended considerable time *fn3 and effort in establishing the upgrade program as well as the showroom. Westminster clients would and did choose their selections from this showroom.
Plaintiffs asked Westminster for money in advance in order to purchase materials and store those materials at an off-site facility. Westminster denied the request, stating that such a payment was not their typical practice and that it normally paid a contractor after each unit was completed. In a letter dated April 21, ...