On January 31, 2020, the New Jersey Appellate Division affirmed the trial court’s rejection of a general contractor’s claim for deficiencies against a subcontractor because the general contractor failed to strictly comply with the contractual notice and opportunity to cure provision of the subcontract.  Cnj Constr. Corp. v. Autobuilders Gen. Contr. Servs., 2020 N.J. Super. LEXIS 223 (App. Div. Jan. 31, 2020). 

The case arises from four (4) identical subcontracts for the construction of a Maserati dealership.  The subcontracts required, among other things, that if the subcontractor:

significantly and negatively impacts the timely completion of the Project or otherwise negatively impacts the work in general, then after serving three (3) days’ written notice, unless the condition(s) specified in such notice shall have been alleviated within such three (3) days, [general contractor] may, at its option: (a) . . . take such steps as are necessary to overcome the condition, in which case [subcontractor] shall be liable to [general contractor] for the cost thereof . . . or (b) terminate the Subcontract for default [and] complete the work either by itself or through others

The subcontracts also prescribed the methods for notifying the subcontractor of any alleged deficiency.

After commencing construction, the general contractor sent four (4) letters, one (1) for each subcontract, which generally described the alleged deficiencies in the subcontractor’s work.  The letters – which were not sent in conformance with any of the acceptable delivery methods set forth in the subcontract – also notified the subcontractor that the general contractor would supplement the subcontractor’s work and back charge the subcontractor for its related costs and expenses. 

The day after receiving the letters, the subcontractor wrote to the general contractor requesting clarification about the nature of the alleged deficiencies and an opportunity to cure them.  Eight (8) days after receiving the subcontractor’s response, the general contractor provided the subcontractor with a detailed explanation of the alleged deficiencies.  The general contractor, however, did not provide the subcontractor with an opportunity to cure.  In fact, at the time it sent its response letter, the general contractor had already secured a replacement contractor to correct certain of the subcontractor’s alleged deficiencies.  

The lawsuit arose after the subcontractor filed a construction lien and complaint as a result of the general contractor’s refusal to pay for certain portions of the subcontractor’s work.  In response, the general contractor filed counterclaims seeking to recover amounts that it spent to correct the subcontractor’s work.  After a two-day non-jury trial, the judge entered judgment against the general contractor, finding: (i) no evidence that the general contractor complied with the subcontract notice provision; and (ii) that the general contractor failed to provide the subcontractor with three (3) days to cure its deficiencies as required by the subcontracts.  On appeal, the Appellate Division affirmed the trial judge’s decision, finding that his legal and factual conclusions were well supported by the law and credible evidence.

This decision confirms that courts will specifically enforce notice and opportunity to cure provisions within a contract.  Failure to comply with these provisions can negate an otherwise meritorious deficiency claim. General contractors should be cognizant of contractual requirements before supplementing a subcontractor’s forces or otherwise correcting defective work.