General Contractor Duty of Good Faith and Fair Dealing

General Contractor Duty of Good Faith and Fair Dealing

A contractor can be barred from recovering for additional work performed if the contractor violates its duty of good faith and fair dealing.

In Underwater Engineering Services, Inc. v. Utility Bd. of City of Key West 194 So. 3d 437 (Fla. Dist. Ct. App. 2016), the Utility Board of Key West contracted Underwater Engineering Services, Inc. to perform maintenance on 57 pillars of the seven-mile bridge in the Florida Keys.  The contract was based on unit pricing.  The planned quantities of the work called for 200 square feet of Concrete Coating Repair at a price of $110 per square feet, for a total of $22,000.  The contract also required that Underwater provide the Utility Board with 24 hours prior to completing the surface preparation and before the coatings were applies to the poles.  The purpose of the notification was to allow the Utility Board to inspect the structures prior to coating.

After an assessment of the profitability of the project by Underwater, the project manager decided that Underwater would increase its profit if it increased the quantities of work.  Without notifying the Utility Board, Underwater performed 5,006 square feet of work, instead of the planned 200 square feet.  Underwater also did not provide this 24 hour notice to the Utility Board before performing this coating work.  Underwater filed suit against the Utility Board alleging that it was owed nearly $700,000 for the overruns based upon the unit pricing.

The Florida Third District Court of Appeal denied Underwater’s claim finding that it breached teh contract and breached the implied covenant of good faith and fair dealing.  Florida law recognizes an implied covenant of good faith and fair dealing in every contract, which is intended to protect the reasonable expectations of the contracting parties in light of their express agreement.  The court found that Underwater’s failure to properly notify the Utility Board of the inspection was designed to conceal the increase the quantities of work performed.  If Underwater allowed such an inspection, the Utility Board would has discovered the increase in the contract price.  This decision by Underwater violated both the contract and the implied covenant of good faith and fair dealing.  As a result, the Utility Board was thereby relieved of its contractual obligation to pay for this work.

Therefore, it is important for a contractor to always act in good faith and deal fairly in performing its work.  If a contractor decides to perform additional work, without notice or prior authorization, the contractor may not be able to recover any money for this additional work.