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New York Court Holds Contractor's Failure to Timely Pass Through Subcontractor Delay Claim to the Owner Constitutes Breach of the Covenant of Good Faith and Fair Dealing

Rad and D'Aprile, Inc. v. Arnell Construction Corp, No. 502464/14, 2019 BL 131606 (NY. Sup. Ct. April 3, 2019)

Author: Kristopher Berr

6/06/2019

Read the full post at Constructlaw

New York Court Holds Contractor's Failure to Timely Pass Through Subcontractor Delay Claim to the Owner Constitutes Breach of the Covenant of Good Faith and Fair Dealing

In June of 2001, Arnell Construction Corp. (Arnell) entered into a prime contract to build two sanitation garages in Brooklyn for the New York City Department of Sanitation (the City). Arnell subcontracted the project’s masonry work to Rad and D’Aprile, Inc. (Rad). After execution of the subcontract, Rad was informed that the start of work would be delayed because the City had not yet obtained ownership or access to all portions of the site. When its work did commence, only limited portions of the site were available. This caused inefficiencies in Rad’s work and caused it to incur increased costs.

During the Summer of 2002, Rad put Arnell on notice of its delay claim and requested additional compensation under the subcontract. In a liquidating agreement dated August 9, 2002, Arnell agreed to increase Rad’s compensation by $100,000 and further agreed to incorporate Rad’s claim into Arnell’s own claims to the City, which Arnell would submit at the completion of the project. Arnell agreed that “[a]ny money received in the settlement of the claim [for Rad] over the $100,000 will be forwarded to [Rad].”

Rad substantially completed its work in September of 2005 and, after working with Arnell to perfect its claim throughout 2005, ultimately submitted its claim to Arnell on October 31, 2005. In turn, in January of 2006, Arnell informed Rad that the claim had been submitted to the City, along with the claims of Arnell and other subcontractors. Thereafter, Rad periodically inquired about the status of the claim. From 2006 through 2010, Arnell provided assurances that the claim had been submitted and remained pending with the City. In reality, however, Arnell never submitted its claim to the City until August 11, 2010. 

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