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Joseph Fabi, Inc. v. Agate Construction Company

A-11374-96T3, (N.J. Super. App. Div. 1998) (Unpublished)

CONTRACTORS; DAMAGES; NOTICE—Even though a contractor did not give its subcontractor the notice of claim required under their contract, it still got the equivalent of its claimed damages against the subcontractor.

A contract between a contractor and subcontractor provided that the contractor could correct any deficiencies and deduct the cost from the money owed to its subcontractor after giving the subcontractor notice and an opportunity to cure. When the work was completed, the subcontractor was still owed money. The contractor claimed that some of the work was defective and that it incurred expenses to correct the problems, but notice of the defects was never given to the subcontractor. The subcontractor then filed suit for the unpaid amount and the contractor counterclaimed for the amount it expended to correct the deficiencies. At trial, the contractor argued that it did not give notice to the subcontractor because the nature of the repairs was beyond the subcontractor’s expertise, and any repairs the subcontractor might have made would have impaired the integrity of the building. The judge found error in the subcontractor’s work and that the subcontractor had the absolute right to notice and an opportunity to cure. Despite the lack of notice, the judge concluded that the subcontractor was not damaged and that the cost to the contractor was adequately proven. The judge held that there was no cause of action on either the complaint or the counterclaim. The effect of this was that neither party had a right to recovery. On appeal, the subcontractor argued that the lower court erred because its decision essentially allowed the contractor to recover on its claims without ever giving it notice of the claim.

In affirming the lower court decision, the Appellate Division stated that the trial judge’s ruling did not amount to a recovery for the contractor, but was a finding that the cost of repairs was essentially equal to the amount owed to the subcontractor. The failure to give notice was not fatal to the contractor’s claim, nor did it evidence a lack of good faith.


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