Forfeiture Rule in Construction Disputes Under Review by the Massachusetts Supreme Judicial Court
Since the early 1900’s, Massachusetts courts have held that a contractor cannot recover on the contract itself without showing complete and strict performance of all terms or, in the event the contract cannot be completed fully, that the contractor substantially performed and attempted, in good faith, to perform fully. Under this rule, if the court finds that the contractor intentionally departed from the specifications of the contract, the contractor is prohibited from recovering under the contract, forfeiting its right to contract damages.
The Massachusetts Supreme Judicial Court (SJC) will hear arguments this week requesting the forfeiture rule in construction cases to be overturned. The appellant in G4S Technology LLC v. Mass. Tech. Park Corp., SJC-12397, appeals a prior summary judgment ruling, wherein the trial court denied the contractor’s claims for approximately $10 million in delay-and-impact damages on the basis of the forfeiture rule. Despite ultimately completing the project, it was determined that the contractor paid some of its subcontractors late and submitted false certifications. Those actions were in breach the contract, and the trial court determined that those actions were sufficient to deny the contractor’s claims.
The SJC will consider whether Massachusetts should adopt an alternative standard that considers whether a breach was an uncured, material breach that alleviates the non-breaching party’s obligation to pay and weigh a breaching party’s lack of good faith or willfulness, among other factors to be considered by the court. This multi-factor analysis is applied currently by Massachusetts courts in other contract disputes, but not in connection with construction disputes.
Should the forfeiture rule be overturned, it would have wide-reaching consequences and create greater flexibility in arguing an entitlement to damages on breach of contract claims. Contractors would be wise to keep track of this case as it proceeds. If you have questions concerning your rights in connection with a construction dispute, consult an experienced Massachusetts construction attorney.