Question

In December 1992, Beys Specialty Contracting, Inc., contracted with New York City’s Metropolitan Transportation Authority (MTA) for construction work. Beys subcontracted with Hudson Iron Works, Inc., to perform some of the work for $175,000. Under the terms of the subcontract, within seven days after the MTA ap­proved Hudson’s work and paid Beys, Beys would pay Hudson. The MTA had not yet ap­proved any of Hudson’s work when Beys submitted to the MTA invoices dated May 20 and June 21, 1993. Without proof that the MTA had paid Beys on those invoices, Hud­son submitted to Beys an invoice dated September 10, claiming that the May 20 and June 21 invoices incorporated its work. Beys refused to pay, Hudson stopped working, and Beys paid another contractor $25,083 more to complete the job than if Hudson had completed its subcontract. Hudson filed a suit in a New York state court to collect on its invoice. Beys filed a counterclaim for the additional money spent to complete Hudson’s job. In whose favor should the court rule, and why? What might be the measure of damages, if any?

Answer 1

Damages
The court awarded Hudson what it sought, and Beys appealed to a state intermediate appellate court. This court reversed the award of the trial court and remanded the case for the entry of a judgment in favor of Beys. The appellate court pointed out that there was no proof Beys was paid for Hudson's work. "In addition, since it was also undisputed that none of Hudson's work had been approved by the MTA when Beys submitted the invoices dated May 20, 1993, and June 21, 1993, Hudson was not entitled to payment because . . . the subcontract conditioned payment upon a determination by the MTA that Hudson's work was satisfactory." The court concluded that "Beys did not breach the subcontract by refusing to comply with Hudson's demand for payment." Finally, "Hudson stopped performing under the subcontract after its demand for payment was rejected, and . . . Beys paid $25,083 more to complete the job than if Hudson had completed its subcontract. As a result, Beys is entitled to a judgment on its first counterclaim against Hudson in the sum of $25,083."

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