Questar Builders, Inc. v. CB Flooring, Inc. (bid shopping; termination for convenience)

On Feb. 17, 2009 the American Subcontractors Association and ASA of Baltimore and the D.C. Metropolitan Subcontractors Association, through the ASA - Subcontractors Legal Defense Fund, filed an amici curiae brief in a case before the Maryland Court of Appeals. The question before the Court is whether a contractor can exercise a termination for convenience clause to terminate a subcontractor for any reason or no reason at all without liability.

In this case, a subcontractor, prior to starting work, but after its contract had been fully executed and it had begun preparation to start the work, was terminated after submitting a requested change order for extra costs arising out of design changes ordered by the project owner. The general contractor then shopped the existing contract to obtain a competitor's bid to perform the same work for less. The general contractor, ignoring the duty of good faith and fair dealing in contracts seeks carte blanche to terminate its contracts for ITS convenience, the convenience of making more money, not the original intent and industry understanding of the operation of a termination for convenience clause.

ASA has asserted that "a holding carving...an exception to the reach of good faith and fair dealing covenant would not only poison business relationships and eliminate business certainty, but also do great damage to the ability of subcontractors to rely on their signed contracts as a reliable indicator of future work and expected revenues" and would make subcontracts "illusory and meaningless."

Read the brief and follow this Blog for updates on the court's decision.