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Jet Blast Hydrodemolition Corp. v. Maarv Waterproofing, Inc.

A-6196-03T2 (N.J. Super. App. Div. 2005) (Unpublished)

CONTRACTS; INTERPRETATION; INDUSTRY CUSTOMS— A contract is to be read in accordance with its terms and not according to industry customs, such as when the contract uses a total priceand the industry custom is to base the ultimate price on unit costs.

A general contractor was hired to repair and restore a hospital parking garage. The general contractor solicited bids for some of the work to be performed. A subcontractor submitted a bid to the general contractor. The subcontractor used special equipment to distribute high pressure water to break up concrete. The subcontractor’s bid included the costs of setting up and removing the equipment. It also provided a unit price for the removal of the concrete per square foot. The general contractor accepted the subcontractor’s bid and the parties entered into a written agreement in which the subcontractor agreed to demolish and remove concrete from the garage. The agreement did not contain a fee for setting up and removing the subcontractor’s equipment nor a unit price for the removal of the concrete per square foot. Instead, it provided a total contract price for the performance of the work. The subcontractor removed less concrete from the garage than was contemplated under the contract. The general contractor then paid the subcontractor based upon the square footage of concrete actually removed instead of the total contract price. The subcontractor sued the general contractor asserting that it had breached the contract by not paying the full contract price. In its defense, the general contractor argued that the agreement was intended to be a unit price contract and not a lump sum contract. It contended that unit price agreements were customary in the demolition business, and therefore the agreement should be construed as a unit price contract. It requested that the lower court explain the custom when charging the jury. The lower court would not charge the jury regarding the custom, and at the conclusion of the trial, the jury ruled in favor of the subcontractor on the basis that the terms of the contract indicated that it was a lump sum agreement. The general contractor appealed, asserting that the lower court erred in failing to charge the jury regarding the customs of the demolition business.

The Appellate Division affirmed the lower court’s ruling, holding that the lower court was correct in rejecting the general contractor’s proposed jury instructions regarding industry customs. The general contractor’s proposed instruction would have been erroneous in the context of the case. It would have required the jury to find that the contract between the parties was a unit price contract if it found that unit price agreements were customary in the industry. The Court held that the primary issue in the case was not industry custom, but was what the parties agreed to in the written contract. The contract expressly provided that payment was to be made to the subcontractor in a lump sum, and not based upon the units of concrete removed.

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