United States for Use of Susi Contracting Co. v. Zara Contracting Co.

Facts

On March 4, 1941, Zara Contracting Co. (Defendant) entered a contract with the United States, whereby Defendant agreed to construct an extension to an airport. On April 2, 1941, Defendant entered a subcontract with Susi Contracting Co. and D’Agostino & Cuccio, Inc. (Plaintiffs) to perform all of the work required under the main contract. Article 5 of the subcontract stated that no representations had been made regarding the subsurface conditions, and that Plaintiffs could not make a claim for damages due to unknown conditions. During excavation, Plaintiffs discovered unexpected soil conditions that caused difficulty in the performance of the work and required work not called for under the main contract. Plaintiffs demanded more money for their work. Defendant refused and, two months after Plaintiffs began work, took over the work itself. Plaintiffs sued Defendant, alleging wrongful termination of the subcontract. They sought, among other things, the reasonable value of their work. The district court found that Defendant had wrongfully terminated the contract and owed Plaintiffs $39,107.10 for Plaintiffs’ services and $18,600 for the increased cost of excavation. Defendant appealed, challenging Plaintiffs’ entitlement to the $18,600 for the increased costs.