Case #2

Oliver and Olivia Owners decided to build their dream home. The Owners retained

Awesome Architects, Inc. (AAI), an architectural firm, to create the plans and

specifications and to administer the project.

The Owners hired Prime Builder, Inc. as prime contractor, using an American Institute

of Architects General Conditions of the Contract for Construction, AIA A201-2007. Prime

Builder hired several subcontractors.

Prime Builder began performance. The city's building inspector happened to be

driving by and saw the new construction. Curious, he checked and found that no

building permit had been issued. He ordered the work stopped until the Owners put in

an application for a permit, which was then approved.

AAI, meanwhile, was unhappy with the quality of the contractor's work. Within a week

after the foundation was poured, it began to crack. AAl determined the soil preparation

work was not properly done. It ordered Prime Builder to remove the foundation and

redo the soil preparation, which the contractor did.

Prime Builder began to suffer reduced cash flow, which caused it to delay paying

subcontractors. As a result, subcontractors began not to show up, and the entire

project slowed down. Just a month before the completion date, the work was only

half done.

The Owners despaired that the project would never be completed. They asked AAI

to determine whether the prime may be terminated for cause. AAI thought termination

would be justified, as it seemed impossible for Prime Builder to finish on time. The

next day the Owners mailed a letter to Prime Builder, informing the contractor that the

contract was immediately terminated for cause.

Claiming the termination was wrongful, Prime Builder sued the Owners for breach

of contract.

Question:

Please evaluate this scenario from a legal perspective. I will be looking for legal terms and jargon, case law justification and citation of source of your response. You need to include at minimum a statement and/or discussion on the source or statement of the problem; rights and duties; sub-bids rights/issues; bidding bargaining situations and penalties/notices/claims/contracts. Please provide some original thought. Please provide no more than 2 graphs or tables if applicable..