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General Contractors’ Liability to Subcontractors for Delay Under Tennessee Law

With some frequency, subcontractors incur extra expense, or lose other opportunities to make money, because another subcontractor did not complete its work within the time by which it was represented it would be completed. There are situations in which it is possible that the general contractor might be responsible for money damages to a subcontractor which incurred a loss because of a delay by another subcontractor.

The starting point to analyze whether, given the facts of the case, the general contractor could be liable for the delay of one subcontractor to another is the written contract. Generally speaking, regardless of what the outcome of a case would be if there was no written contract, the terms of a valid written contract might change the outcome that would otherwise occur under Tennessee common law. That is why a thorough analysis of the terms of the written construction contract, out the outset, is a critical part of any construction case.

If the terms of the written contract do not speak to the issue of the responsibility of the general contractor to a subcontractor for money damages resulting to that subcontractor because of the delay of another subcontractor, the Tennessee case of Foster & Creighton v. Wilson Contracting Company, Inc. (Tenn. Ct. App. 1978) might come into play to assist the subcontractor. Here are the basic facts of that case:

  • The general contractor (the “General Contractor”) contracted for a project which required the resurfacing and repaving of airport runways
  • The General Contractor contracted with a subcontractor to perform earth moving and grading (the “Grading Subcontractor”)
  • The General Contractor also contracted with Foster & Creighton to perform all of the paving, which included: (1) Resurfacing existing runways; and, (2) paving new runways
  • It was possible for Foster & Creighton to perform the resurfacing work without the Grading Subcontractor having finished its work, but it was not possible for Foster & Creighton to pave new runways until the Grading Subcontractor’s work was finished
  • The provisions of subcontract between the Grading Subcontractor and the General Contractor and the provisions of the subcontract between Foster & Creighton and the General Contractor required work to be completed by the same date
  • Foster & Creighton’s work required it to set up, on site, a large concrete mixing plant, which would take three weeks to erect
  • In discussions about when Foster & Creighton should begin its work, the General Contractor expressed that it wanted Foster & Creighton to begin its work significantly sooner than Foster & Creighton wanted to begin based on Foster & Creighton’s opinion that the Grading Subcontractor was moving so slowly that it would not complete its work in time for Foster & Creighton to begin its paving work without having to have its crew and equipment remain idle on the project site
  • In the discussions, a representative of the General Contractor assured Foster & Creighton that, if it set up its plant and started on the resurfacing, by the time it finished the resurfacing, the Grading Subcontractor would have completed its work such that Foster & Creighton could “proceed” with its work
  • Foster & Creighton complied with the requests of the General Contractor, but the Grading Subcontractor’s work was delayed such that Foster & Creighton incurred significant expense while waiting in excess of two extra months for the Grading Subcontractor to finish its work to the point that Foster & Creighton could begin its paving work

Foster & Creighton filed a lawsuit against the General Contractor for its damages. The trial court awarded it $26,000.  On appeal, the Court of Appeals of Tennessee upheld the decision of the trial court that the General Contractor was liable to Foster & Creighton.

The legal theory which the Court of Appeals found applicable was promissory estoppel. To recover under a breach of contract theory, a plaintiff must prove that there was a valid contract.  A valid contract requires more than just a promise. It requires that there be some consideration, whether it be something of value, like money, or a corresponding promise.

In the case before it, the Court of Appeals pointed out that the promise of the representative of the General Contractor that the Grading Subcontractor’s work would be completed was not accompanied by any consideration. Thus, it did not rise to the level of a contract. However, the court pointed out that the doctrine of promissory estoppel, which is sometimes also referred to as the doctrine of detrimental reliance, was designed to avoid an injustice in just such a situation as was Foster & Creighton.

To prove liability for promissory estoppel, a plaintiff must prove that the defendant made a statement to induce the plaintiff to act; the statement must have induced action of a definite and substantial character by the plaintiff; the plaintiff’s reliance must have been justified; and the plaintiff must have suffered some damage in reliance on the statement.

For Tennessee construction law attorneys representing subcontractors, the Foster & Creighton case and the doctrine of promissory estoppel might, in some cases, be a pathway for the recovery of a damages.