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Meco, Inc. v. Township of Freehold

A-5674-09T4 (N.J. Super. App. Div. 2011) (Unpublished)

PUBLIC BIDDING —Unless stated otherwise, incorporation of the Department of Transportation’s Standard Specifications for Road and Bridge Construction in a bid package it is only intended to incorporate its technical specifications and not any economic rules such as those that might allow an escalation in contract price based upon unanticipated increases in material prices.

A municipality’s bid package provided that bidders had to specify net prices for all materials and labor required by the specifications; that the bidder accept the municipality’s specifications and agree to report any ambiguities; and that the Standard Specifications for Road and Bridge Construction of the New Jersey Department of Transportation (NJSS) had been added to govern the technical requirements of the project. The lowest responsible bidder and the municipality entered into a contract memorializing the terms of the bid package.

During the contract period, the contractor submitted a written change order request for an increase to cover asphalt cost escalation. Though admitting that there was no provision in the contract allowing for escalation, the contractor suggested that the contract had incorporated a provision of the NJSS that set guidelines for determining asphalt price adjustment. The municipality refused to accept the increase, contending that the price of asphalt was not a technical requirement that would be amended by the NJSS.

The contractor continued work and billed at the established rate. Months later, the contractor’s counsel requested payment from the municipality for its increased asphalt costs and, the following month, filed a complaint alleging that the municipality had breached the contract. The municipality denied the allegations and asserted the defenses of accord and satisfaction, laches, and the statute of limitations. The municipality moved for summary judgment, arguing that the contract did not incorporate the relevant section of the NJSS and, even if it did, the contractor failed to comply with the requirements set forth in the NJSS.

The contractor opposed the motion with a certification from the company’s principal certifying that it had been standard industry practice to rely on the NJSS throughout the bidding and construction phases of municipal roadways, and that it did so in preparing this bid. By reason of the exponential increase in asphalt prices, it said it notified two municipal officials of the need for escalation, telling them that it would rely on the NJSS escalation provision. The municipality provided certifications from the municipal officials in contradiction to that alleged conversation, as well as a certification from the municipal administrator who stated that the two municipal officials were incapable of binding the municipality to any modification of the contract. The lower court granted the municipality’s motion, finding the contract language clear and unambiguous that prices were to be determined solely by the bid proposal.

On appeal, the Appellate Division held that the contract was unambiguous. Even though the punctuation in one clause of the contract did create some ambiguity, the language was made clear by an examination of the other sections of the contract. Next, the Court held that the conflicting certifications did not create an issue of material fact defeating summary judgment. The principal’s certification and response to interrogatories were inconsistent; in interrogatories, he claimed that a municipal official told his employee that the company should apply for escalation, but did not claim that the municipal official told him that the municipality would rely on the NJSS escalation provision. Additionally, the contractor did not comply with the NJSS escalation provision; the bid proposal did not include a line item for asphalt escalation as would have been required.

The contractor also argued that the contract constituted an unconscionable contract of adhesion because it was “take-it-or-leave-it.” However, the Court noted that the bid package itself could not be one of adhesion because it invited bidders to bring ambiguities or errors to the municipality’s attention. Finally, in affirming the lower court’s decision, the Court upheld the lower court’s finding of accord and satisfaction. The contractor submitted three invoices after the municipality rejected the request for escalation. They contained no indication that the contractor continued to seek a price adjustment. In fact, the last invoice was marked “final.”

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