TERMINATION CLAUSES MUST BE STRICTLY COMPLIED WITH

In October 2021, an Appellate Court in New York found that a general contractor breached a contract with its subcontractor when it failed to provide a contractual 10-day notice to cure period before terminating it and hiring another subcontractor to complete its work. East Empire Construction, Inc. v. Borough Construction Group LLC, 200 A.D.3d 1 (1st Dept. 2021).

The Court upheld the well settled rule that termination provisions in a contract must be strictly complied with and that only where a subcontractor unequivocally abandons a project or repudiates the agreement will strict compliance be waived.

Comment:

Failing to terminate a contractor according to the letter of the contract could prove a costly mistake and result in a wrongful termination. In such a scenario, not only may the offending party have to pay for damages but it also risks losing its rights to seek completion costs it would ordinarily have been entitled to under a proper termination. On the other hand, contractors who are terminated should determine whether their contractual rights were violated by a premature termination or an otherwise ineffective written notice.

About the author: George Marco is an attorney practicing in the field of construction law. He also holds a Bachelor of Science in Mechanical Engineering and was previously employed as a Project Manager for a public improvement contractor.

If you would like more information regarding this topic or any other related to construction law please contact George Marco at george@gmarcolaw.com or call (516) 464-2320.

Disclaimer: This article is for informational purposes only and not intended to serve as legal counsel.