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Christopher A. Priore (Partner-Albany) and Olivia Orlando (Associate-Albany) represented a subcontractor that supplied and paved aggregate and liquefied asphalt for the construction of a federally funded municipal airstrip. The subcontract included an “escalation clause” that allowed the subcontractor to make payment requests for materials based on a market index price at the time of contract award rather than at the time the project was tendered. Since the index price had risen sharply between the time of the bid and the time of placement, the client took the escalation costs into account in his payment requests. The contractor refused to approve payment requests even though the project engineers certified the client’s work and the contractor was paid the basic contract price in full.
Chris and Olivia filed a complaint against the contractor and the contractor’s surety bond, seeking damages for breach of contract and breach of the surety bond’s payment guarantee, and seeking a cause of action under Section 137 of the NY State Finance Law. The contractor claimed that there was a material escalation prohibition clause in the contract that “flowed down” to the subcontract, thereby precluding the principal’s right to escalation of the asphalt materials. The court dismissed defendants’ arguments and agreed with our argument that interest accrued from the date of breach of subcontract and failure to pay a properly filed security bond. Accordingly, the court applied the statutory interest rate of 12% per annum and the interest was more than $200,000 of the total amount. Ultimately, the court granted Chris and Olivia’s motion for summary judgment in full, dismissing all of the defendant’s defenses and justifications for non-payment.
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