Reference no: EM13871728

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Brown University accepted the bid of Marshall Contractors, Inc. (Marshall), to build the Pizzitola Sports Facility on its Providence, Rhode Island, campus. The parties intended to execute a formal written contract. Brown decided to pay $7,157,051 for the project, but Marshall sought additional payment for items it deemed extras and not contemplated in its bid. Because the parties were unable to agree on the scope of the project as compared to the price Brown was willing to pay, they never executed the formal written contract. Never- theless, in the context of this disagreement over terms and price, construction began in May 1987. When the parties could not resolve their disagreements as the project neared completion in January 1989, Marshall sued Brown University, seeking to recover the costs for what it deemed "changes." Brown asserted that an implied-in-fact contract existed for all work at the $7,157,051 figure because the contractor went ahead with the project knowing the money Brown would pay. The litigation ended up in the Supreme Court of Rhode Island, and in 1997, the court concluded that no express or implied-in-fact contract had ever been reached by the parties concerning the scope of the project and what costs were to be included in the price stipulated by Brown. The case was remanded to the trial court for a new trial. After a trial on the theories of quantum meruit and unjust enrichment, a jury awarded Marshall $1.2 million dollars, which was some $3.1 million less than Marshall sought. Brown University appealed, and on November 21, 2001, the Supreme Court of Rhode Island affirmed the jury verdict for the contrac- tor, determining that the proper measure of damages on unjust enrichment and quantum meruit theories was "the reason- able value of the work done."*

In May 1987 when the parties could not reach agreement enabling the execution of a formal written contract, thinking things through at that point in time should have exposed the potential for significant eco- nomic uncertainties to both parties in actually starting the building process under such circumstances. In the spring of 1987 when all parties were unable to reach agreement, mediation or expedited arbitration by con- struction experts may well have resolved the controversy and yielded an amicable written contract with little or no delay to the project. Instead, the unsettled cost issues during the building process could have had an adverse impact on the "job chemistry" between the contractor and the owner, which may have adversely affected the progress and quality of the job. The 12 years of litigation that, with its economic and human resource costs, yielded just $1.2 million for the contractor was a no- win result for both sides. A primary rule for all managers in projects of this scope is to make sure the written contracts are executed before performance begins! Relying on "implied-in-fact" or quasi-contract legal theories is simply a poor management practice.