Christopher A. Priore (Partner-Albany) and Olivia Orlando (Associate-Albany) represented a subcontractor who supplied and placed aggregate materials and liquid asphalt for the construction of a federally funded municipal runway. The subcontract contained an "escalation clause" permitting the subcontractor to make payment requisitions for materials based upon a market index price at the time of placement, not the time of project bidding. Since the index price had drastically increased between the time of bidding and the time of placement, the client included the escalation costs in its applications for payment. The contractor refused to approve payment requisitions notwithstanding the fact that the Project Engineers certified the client's work and the contractor was paid the base contract price in full.
Chris and Olivia filed a Complaint against the contractor and the contractors' Surety seeking damages for breach of contract and breach of the Surety's payment bond, and asserting a cause of action under NY State Finance Law section 137. The contractor contended there was a clause prohibiting contract terms for material escalations that "flowed down" to the sub-contract and therefore precluded the client's claim for escalation of the asphalt materials. The Court rejected defendants' arguments and agreed with our argument that interest accrued as of the date of the breach of the subcontract and failure to pay a properly made bond claim. Accordingly, the court applied the statutory mandated rate of interest of 12% per annum, and the interest equated to more than $200,000 of the overall award. Ultimately the Court granted Chris and Olivia's Motion for Summary Judgment in full and rejected all of the defendant's defenses and justifications for nonpayment.
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