Absent Contract, Firm Performing Work for City Cannot Recover

The Fourth Appellate District affirmed in part and reversed in part a judgment. The court held that an engineering firm that was retained by a city to redesign a municipal golf course under a contract that required written change orders could not recover for alleged extra work as a matter of law.

The City of Carlsbad contracted in writing with P&D Consultants, Inc., for services pertaining to a redesign of the City’s municipal golf course. The contract provided that no amendments, modifications, or waivers of contract terms would be allowed absent written agreement signed by both parties.

The contract also included an integration clause. In fact, the parties did make several written amendments that increased the contract price for extra work. All those amendments stated that all other provisions of the contract remained in full force and effect.

P&D sought still more compensation from the city, ostensibly for work not included in one of the amendments. The city refused to pay. P&D sued for breach of written and of implied contract, quantum meruit, and violation of prompt payment statutes. The city cross-complained for breach of contract, alleging deficient and incomplete work by P&D.

At jury trial, P&D’s theory was that the contract’s written-change-order requirement was modified by a city employee’s oral authorization of the extra work and by the parties’ conduct in handling the written amendments.

On P&D’s complaint, the jury found the city liable for breach of contract and awarded P&D the full amount of requested damages. On the city’s cross-complaint, the jury found P&D liable for breach of contract and awarded the city a comparatively small sum. Both the city and P&D appealed.

The court of appeal affirmed in part and reversed in part, holding that P&D could not recover for its alleged extra work as a matter of law.

The court found that P&D’s claim for breach of contract lacked merit as a matter of law because P&D could not recover for extra work without a written change order as required by the contract. Unlike private contracts, public contracts that require written change orders cannot be modified orally or through the parties’ conduct. Thus, even were P&D’s evidence of oral authorizations by a city employee for extra work fully credited, P&D could not prevail. Accordingly, submission of the matter to the jury was error, since the city’s nonsuit motion should have been granted.

Katsura v. City of San Buenaventura (2007) 155 Cal.App.4th 104 held on similar facts that oral modification was inapplicable, given that those dealing with a public agency are presumed to know the law with respect to any agency’s authority to contract. Katsura involved oral modification of a contract, but its reasoning applied equally to modification through conduct.

Likewise, the plain language of the contract here limited the city’s power to contract to the contractually prescribed method. Thus, P&D acted at its peril when it ostensibly relied on a city employee’s oral authorization for extra work without a written change order. The cases cited by P&D in support of modification were unavailing and inapposite.

The court also found that P&D’s other theories of recovery lacked merit. P&D could not pursue on appeal its theory that the city misled it into believing that the golf-course project’s architect would be available to P&D during its work and that it relied on that availability in making both its bid and the contract, given that it did not raise at trial any theory of misrepresentation.

Additionally, the court rejected P&D’s contention that if the judgment were reversed, remand was necessary for reinstatement and trial of P&D’s nonsuited claims for implied contract and quantum meruit. It was well settled that where a written-change-order requirement is not met, a private party cannot sue a public entity on an implied-in-law or quasi-contract theory because such theory is based on quantum meruit or restitution considerations that are outweighed by the need to protect and limit a public entity’s contractual obligations.

The court also rejected P&D’s contention that remand was necessary due to alleged error in the directed verdict on its claim for violation of prompt payment statutes. That issue was moot because P&D was not entitled to payment for any extra work without a written change order.

Nor was there merit in P&D’s argument challenging denial of leave to amend to add claims for breach of the implied covenant of good faith and fair dealing and of a so-called “duty to negotiate in good faith.” The trial court’s ruling was based on unreasonable delay, since P&D did not seek to amend until after the trial readiness conference. Thus, amendment would have required additional discovery and might have resulted in demurrer or other pretrial motions. Further, P&D offered no explanation for its delay.


P&D Consultants v. City of Carlsbad

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Bathroom designs can be tricky if you are into designs.

March 26, 2015 | Unregistered CommenterNova Science Publishers

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