CHAPTER 18 Performance and Discharge 337 18-8. A Question of Ethics-Conditions. King County, Washington, hired Frank Coluccio Construction Co. county secretly colluded with its property damage insurer (FCCC) to act as general contractor for a public works to deny payment. What do these facts indicate about the project involving the construction of a small utility county's ethics and legal liability in this situation? tunnel under the Duwamish Waterway. FCCC hired (b) Could DBM, as a third party to the contract between Donald B. Murphy Contractors, Inc. (DBM), as a subcontractor. King County and FCCC, maintain an action on the con- DBM was responsible for constructing an access shaft at the east- tract against King County? Discuss. ern end of the tunnel. Problems arose during construction, includ (c) All-risk insurance is a promise to pay on the "fortuitous" ing a "blow-in" of the access shaft that caused it to fill with water, (accidental) happening of a loss or damage from any wil, and debris. FCCC and DBM incurred substantial expenses cause except those that are specifically excluded. Payment from the repairs and delays. Under the project contract, King usually is not made on a loss that, at the time the insur- County was supposed to buy an insurance policy to "insure against ance was obtained, the claimant subjectively knew would physical loss or damage by perils included under an 'All-Risk' occur. If a loss results from faulty workmanship on the Builder's Risk policy. " Any claim under this policy was to be filed part of a contractor, should the obligation to pay under an through the insured. King County, which had general tisperty all-risk policy be discharged? Explain. damage insurance, did not obtain an all-risk builder's risk policy. 18-9. Special Case Analysis-Material Breach. Go to For the losses attributable to the blow-in, FCCC and DBM sub- Case Analysis 18.2, Kohel v. Bergen Auto Enterprises, L.L.C. mitted builder's risk claims, which the county denied. FCCC filed Read the excerpt, and answer the following questions. a suit in a Washington state court against King County, alleging, (a) Issue: This case involved allegations of breach of contract among other claims, breach of contract. (Frank Coluccio Con- involving which parties and for what actions? struction Co. v. King County, 136 Wash. App. 751, 150 13d (b) Rule of Law: What is the difference between a material 1147 (Div. 1 2007)) (See Conditions.) breach and a minor breach of contract? (a) King County's property damage policy specifically (c) Applying the Rule of Law: How did the court determine excluded, at the county's request, coverage of tunnels. The which party was in material breach of the contract in this county drafted its contract with FCCC to require the all- case? risk builder's risk policy and authorize itself to "sponsor" (d) Conclusion: Was the defendant liable for breach? Why or claims. When FCCC and DBM filed their claims, the why not?Business Case Problems damage i For the lo 18-4. Business Case Problem with Sample Answer- 18 6. Discharge by Operation of Law. Dr. Jake Lamb signed an employment agreement with Baptist Heal mitted b Material Breach. The Northeast Independent School District in Bexar County, Texas, hired STR Constructors, vices, Inc., to provide cardiothoracic surgery services to Baptist a suit in Memorial Hospital-North Mississippi, Inc., in Oxford, Mis among o Lid., to renovate a middle school. STR subcon- sissippi. Complaints about Lambert's behavior arose almost struction tracted the tile work in the school's kitchen to New- 1147 (1 man Tile, Inc. (NTI). The project had already fallen immediately. He was evaluated by a team of doctors and pet behind schedule. As a result, STR allowed other workers to walk chologists, who diagnosed him as suffering from obsess (a) Kin over and damage the newly installed tile before it had cured, compulsive personality disorder and concluded that he was ex forcing NTI to constantly redo its work. Despite NTT's requests unfit to practice medicine. Based on this conclusion, the col for payment, STR remitted only half the amount due under risl their contract. When the school district refused to accept the hospital suspended his staff privileges. Citing the suspension, kitchen, including the tile work, STR told NTI to quickly make Baptist Health Services claimed that Lambert had breached cla his employment contract. What is Lambert's best defense to repairs. A week later, STR terminated their contract. Did STR this claim? Explain. [Baptist Memorial Hospital-North Missit breach the contract with NTI? Explain. [STR Constructors, Lid. v. Newman Tile, Inc., 395 S.W.3d 383 (Tex.App.-El Paso sippi, Inc. v. Lambert, 157 So.3d 109 (Miss.App. 2015)] (See Leg 2013)] (See Discharge by Performance.) Discharge by Operation of Law.) 18-7. Conditions. H&J Ditching & Excavating, Inc., was 18-10 . For a sample answer to Problem 18-4, go to Appendix E at has a the end of this text. hired by JRSF, LLC, to perform excavating and grading work thous 18-5. Conditions of Performance. Russ Wyant owned on Terra Firma, a residential construction project in West befor Knox County, Tennessee. Cornerstone Community Bank Humble Ranch in Perkins County, South Dakota. Edward financed the project with a loan to JRSF. As the work pro- infor Humble, whose parents had previously owned the ranch, as sc was Wyant's uncle. Humble held a two-year option to buy gressed, H&J received payments totaling 90 percent of the the ranch. The option included specific conditions. Once price on its contract. JRSF then defaulted on the loan from cam it was exercised, the parties had thirty days to enter into a Cornerstone, and Cornerstone foreclosed and took possession (a) purchase agreement, and the seller could become the buyer's of the property. H&] filed a suit in a Tennessee state court lender by matching the terms of the proposed financing. against the bank to recover the final payment on its contract. The bank responded that H&J had not received its payment After the option was exercised, the parties engaged in lengthy because it had failed to obtain an engineer's certificate of final negotiations. Humble did not respond to Wyant's proposed completion, a condition under its contract with JRSF. H&) purchase agreement nor advise him of available financ responded that it had completed all the work it had contracted ing terms before the option expired, however. Six months to do. What type of contract condition does obtaining the later, Humble filed a suit against Wyant to enforce the engineer's certificate represent? Is H&J entitled to the final option. Is Humble entitled to specific performance? Explain. payment? Discuss. [H&J Ditching & Excavating, Inc. v. Cor- Conditions.) [Humble v. Wyant, 843 N. W.2d 334 (S.Dak. 2014)] (See nerstone Community Bank, _ S.W.3d_, 2016 WL 675554 (Tenn.App. 2016)] (See Conditions.)