A 2013 decision from New York reminds us that threats can be costly. In Mometal Structures, Inc. v. T.A. Ahern Contractors Corp., from the Eastern District of New York, Mometal was hired by Ahern as structural steel subcontractor. The project was delayed for reasons that were not Mometal’s fault. Mometal tried to get the information and approvals it needed; Ahern responded slowly or not at all.
After more than six months, Mometal told Ahern that it would not commit to a steel erection start date unless Ahern issued a change order to cover past delays. Ahern gave notice of default but Mometal didn’t back down. Ahern then terminated Mometal’s subcontract. Mometal and Ahern then sued each other for breach. Ahern won. The court held that, even though Mometal had been exposed to months of frustrating delays (for which it would presumably have been entitled to compensation), Mometal’s demand for a change order was a breach of the contract.
The legal principle involved is called “anticipatory repudiation.” When a party to a contract says “I am not going to perform,” the other party can treat this as a breach. Under the contract with Ahern, Mometal had a duty to continue work even though it had pending claims. Telling Ahern that it would not perform without a change order was an anticipatory repudiation by Mometal.
Washington follows the same rule. In CKP, Inc. v. GRS Construction Co., 63 Wn. App. 601 (1991), the prime contractor threatened to withhold payment from a sub unless the sub agreed to a change order. The court held this was an anticipatory repudiation because the prime had a duty to continue making payments despite a change order dispute.
If your project goes off course and you want to stir the other party into action, remember the doctrine of anticipatory repudiation. Don’t make threats that are not backed up by the contract terms or you might turn a frustrating situation into a disaster.