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G. Pacillo Contracting, Inc. v. Township of South Orange Village

A-5776-06T1 (N.J. Super. App. Div. 2008) (Unpublished)

PUBLIC BIDDING; ARBITRATION — Where the instructions to public bidders state that disputes will not be attributable, but the actual contract contains an arbitration provision, the bidder is entitled to seek arbitration because such an ambiguity is construed against the governmental authority who drafted the contract.

A municipality and a contractor entered into a contract for improvements to be made to a historic firehouse. The contractor, who had worked on other public contracts, bid and won the contract. The project was to be completed according to the architect’s plans. A construction management firm hired by the municipality to oversee the project terminated the contract for cause. The contractor sought an order of arbitration and damages. The municipality refused to participate in arbitration and asserted that, according to the language of the general instructions to bidders, it was not obligated to do so. According to the contract, disputes between the parties were first to be taken to the architect, then to mediation if not resolved by the architect, and ultimately to arbitration if mediation efforts failed.

The contractor brought an action against the municipality to compel arbitration. The lower court found that there was no meeting of the minds on whether the arbitration clauses in the contract applied or whether they were modified by the instructions to bidders, which were incorporated into the contracts. As a result, the contractor’s action was dismissed. On appeal, the Appellate Division noted that the instructions to bidders included a provision that a retired judge would hear any claims as opposed to resolving the matter through arbitration but that the arbitration provision in the contract, like the instructions to bidders, was not deleted from the final version of the contract. The Court determined that the contract’s individual parts were to be harmonized without undue emphasis on any one section resulting in a weakening of others, and found that there was no ambiguity. It found that the arbitration portions, as part of the contract as a whole, were to be enforced and that even if there was an ambiguity in the contract, it was to be construed against the municipality because it drafted the contract. The Court as a result, reversed the lower court’s decision and ordered the municipality to submit to arbitration.

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