Bad Faith Representations to Pay Architect for Design Services Land Building Owner in Hot Water

Subcontractors, suppliers and design professionals:   when a general contractor or developer falsely promises payment in order to induce you to do additional work or supply additional materials, the consequences for the general contractor can be steep. This is especially true if your bargaining power with the developer or general contractor is relatively weak, and your business is relying heavily on the unpaid contract in question.

These lessons were recently reinforced by the Massachusetts Appeals Court in the matter of Kelleher v. Truran, a case involving the renovation of New Bedford’s historic Bristol Building. The project required continuing review and approval from the building owners’ architect.   The architect, Mr. Kelleher, worked on the project for months without payment due to his firm’s financial dependency on the project and representations made to him regarding future payment of outstanding invoices. Mr. Kelleher eventually sued, prevailed at trial, and received a judgment for twice the amount of his unpaid invoices, plus his legal fees. The Appeals Court upheld the decision and found that the building owners’ conduct in “stringing along” Mr. Kelleher constituted not only a breach of contract, but unfair and intentional misrepresentation, thus the additional damages.

The Kelleher case should deter developers and contractors from making misleading representations as to when and how outstanding invoices for additional services or materials will be paid.

Subcontractors, suppliers and design professionals can often avoid litigation similar to that in Kelleher altogether by simply protecting their rights on a project prior to performing work or supplying materials.  The security measures necessary to protect yourself differ between public projects, which are secured by payment bonds, and private projects, on which construction professionals have rights under the Massachusetts mechanic’s lien statute.

If you have any question about protecting your rights, you should contact a lawyer who is experienced in advising subcontractors, suppliers and design professionals about contractor payment and security.     A full discussion of the Kelleher case, and other construction law issues, can be found at our blog, https://www.mirageaslaw.com/blog/.