### IN THE COURT OF APP EALS OF TENNESS EE AT NAS HVILLE Jul y 12, 200 5 S es sio n

RETAI L BUI LDERS, I NC. v. MARGARET LAT HAM

An Appeal f

romthe Circ uit Court for Su m ner County No. 20350-C C . L. Rogers, Judge

No. M2004- 00771-COA-R 3-CV - F iled Dece m ber 22, 2005

This is a construction case

. The plaintiff c onstruction manag er a g ree d to manag e the c onstruction of a r estaurant for the de fe n d ant restaurant owne r. Preliminary documents showed that the construction mana g er agr ee d t o provide its service s for a g uara nteed maximum price. During construction, ther e we re una nticipated proble ms that increa sed cos t s

. After construction wa s completed, the c onstruction manag er soug ht pay ments from the restaur ant owner over and above the g uara nteed maximum price, but the restaurant owne r re fused t o pay more. The construction mana g er filed this lawsuit ag ain s t the re staurant owne r, cla iming that the pa rties did not enter into an enfor cea ble contra ct, and that the r estaurant owner should pay t h e construction manag er the

rea sonable value of i ts service s under a theory of qu an tum me ru it

. After a bench trial, the trial court held in favor

of the re staurant owne r, dete rmining that the parties ha d enter ed into a binding fix ed price contra ct. The c onstruction manag er now appea ls. We aff irm in pa rt and reve rse in part the trial court’s de termination and re mand for f urther pr ocee dings c onsistent with thi s opinion.

Te nn. R . A pp. P . 3 App e al a s o f Rig ht ; J udgm e nt of t he Ci r c uit

Co ur t i s Aff irm ed in Par t, Re verse d in P art, and Rem anded

H OL L Y M. K I RBY , J.
, d e li v e r e d th e o p in io n o f th e Co u r t, in w h ic h W. F RAN K C RAW FORD , P.J
., W.S
., and D AVI D R. F ARMER , J ., joined.

Robert L . DeL aney , Nashville, Tenne ssee, f or the a ppellant, Retail Builder s, I nc.

Curtis M. L inc oln , H e nd e rs on vil le , T e nn e sse e , f or the app e lle e , M arg are t L a tham.

OP IN ION

Plaintiff Retail Builders, Inc. (“ RBI ”), is a c onstruction company that is in the b u s i n ess of bu ild ing a ndre no vatin g re staur a nts

. Jose ph Embu ry (“ Embu ry ” ) is the pr e sid e nt o f R B I . In s ome instances, RB I

works as a gen er al contractor, participating in the a ctual construc tion. I n other“A IA ” is t h e A m e ric a n In stitute o f A rc h itec ts. 1

In e a rlie r p ro c e e d ing s in th is c a se , o n A u g u st 2 7 , 2 0 0 1 , t h e trial c o u rt h a d ru le d tha t t h e a rb itra tio n c la u se in 2

t he A I A document was un enf orce abl e, becau s e t her e h ad been “ no meet i ng of t he mi nds
, no s i gn ed cont r act , an d no oral
agr eement for a ny bi ndi ng ar bi t r at i on. ”

-2- instance s , R BI provides construc tion manag ement, whe re RB I often doe s not participate in the construction, but ra ther c oordinates a nd supervises the c onstruction.

I n 1 99 8, De fe nd a nt/Ap pe lle e Mar g are t L a tham ( “ L a tham” ) m e t w ith Embu ry to d isc us s L atham hiring RBI

to manag e the c onstr u ction of a r estaurant called “ The Light House .” The construction proje ct bec ame known as “The L ight House Restaura nt Project” (“the Project”). L ater , Embury delivere d to L atham a sta ndardized “A I A Docume nt” entitled “Standard Form of 1 Ag ree ment Be tween Owner and Construction Manag er,” 1991 Edition. I t is undisput ed that neither party signe d the AIA document. The pa rties dispute, howeve r, whe ther ha ndwritten notes we re 2 added to the A I A document r efle cting L atham’s a g ree ment t o p ay RBI 10% of the a ctual cost of work pe rformed by

RBI during the construc tion of the Project with a “[g ]uarantee d maxi mum price under A mendment 1 Article 1.”

L atham hire d Charles Ha sty (“H asty ”) a s the eng ineer on the Project, a nd she h i re d Tom And er s o n (“Architec t Anderson” ) as the a rchitec t. She contrac ted with both Hasty and Ar chitect A n d e r s o n to p a y th e m d ir e c tl y f o r th e ir s e r v ic e s

. RB I h a d n o o b li g a ti o n to p a y f o r th e s e r v ic es of either H asty

or Arc hitect Ander son out of the construc tion funds it was to rece ive.

I n a pp ro xima te ly Ma y

19 98 , L a tham so ug ht t o f ina lize fi na nc ing fo r the Pr oje c t. T o o bta in the nec essary

loan, she ne eded a

document to present to the First I ndepende nt Ba nk (“B ank”)

. Towar d this end, on May

12, 1998, befor e plans for the Project we re c ompleted, the parties executed

a one- pag e standa

rdized document entitl ed “A mendment No. 1 To Ag ree ment Be tween O wner and Construction Manag er” (“A mendment”) . The Ame ndment provided:

Pursuant to Parag raph 2.2 of the Agre ement, dated May 12, 1998, Marg are t L atham (Ow n er) and Retail B uilders, I nc. ( Con str uc tio n M an ag e r) , f

or Th e L ig ht H ou se Re staur a nt P ro

je c t ( The Pr

oje c t) , the Owne r and Construction Manag er e stablish a Guar antee d Maxi mum Price and Contrac t Time for Work as set f orth below: 1. $650,000.00 (Six hundred a nd fifty thousan d d o l l ars) g uara nteed maxi mum price. 2. 120 day

contra ct time.

Article I of the Ame ndment conta i n ed p ro visos stating that “Contra ct Docume nts (plans) not

c omp le te d, ” a nd that the “ Gu arante e d ma ximum pric e [is] ba se d on inc omp le te plans , me e tin g s w ith Owner and allowa nces itemiz ed o n E x h i b i t B.” Ex hibit B is a list of nineteen ( 19) items and the respe ctive cost a llowance for those items totaling $650,000. Ex hibit B states that the e stimates were b as ed on an April 6, 1998 site plan/landscape plan deve loped by Hasty , on preliminary

draw i n gs done by Arc hitect Ander son in April 1998, and on discussions with L atham. I ncluded in the l ist ofT h e lo a n w a s p a id d o w n to $ 5 5 0 ,0 0 0 b y the S m a ll B u sin e ss A d m inistra tio n

. 3

-3- items were $57,000 in profit and over head f or RBI and $21,000 for

conting encie s. The Amendme nt pu rp orts t o a me nda n “ Ag re e me nt” date d M a y 12 , 1 99 8; how e ve r, the re is no s ig ne d “ Ag re e me nt” in the rec ord, only

the unsig ned AIA document. No othe r written instruments w ere signe d by either party at any time before or during construction.

Ba sed in part on the Amendment, L atham obtained a $900,000 loan from the B ank. The loan

was c omprised of two pa

rts — $650,000 for c onstruction, and $250,000 for “De sign, Furniture, a nd Eq uip me nt. ” L a tham w a s r e sp on sib le fo r a dmi nis te ri ng th e $2 50 ,0 00 po rt ion of he r l oa n. As is 3

e x p l a i n e d b e l o w , t h e B a n k a d m i n i s t e r e d t h e $ 6 5 0
, 0 0 0 u p o n ap p l i c a t i o n f o r p a y m e n tf

r o mR B I.

Arc hitect Ander son’s first set of a rchitec tural plans we re dated May 20, 1998. Those plans

c la ssi fi e d th e re staur a nt a s a Ty pe 6 buil din g , whi c h ca n be c omp os e d o f w oo d. Ho we ve r, the City

o f H en d er s o n v i l l e i n t erp re t ed i t s b u i l d i n g co d es t o re q u i re t h at t h e r es t au ra n t b e a T yp e 5 b u i l d i n g, which must be built with noncombustible materia ls. I n light of this, the plans we re modified to make the structure a Ty

pe 5 building. Thoug h RBI would later c laim that it takes longe r to build a Ty pe 5 building, no chang es we re ma de to the 120-day completion time set out in the Amendment.

I n addition, during the excavation proce ss, r ock wa s discovere d wher e the f oundation of the building wa s to be laid. There fore , to avoid having to blast the rock to make way for the f oundation, the plans we re modified to r aise the struc ture a few fee t.
On Aug ust 4, 1998, the building permit for the Project wa s issued, and construc tion

commence d soon therea fter. RBI
, as t he construction manag er, r ece ived the invoices f or all labor and materials expended o n t h e Projec t. RBI eng ag ed all of the subcontrac tors and purc hased the construction materials used on the Projec t. As indicated a bove, RBI

periodica lly prepa

red documents entitled “A pplication and Certific ate f or Pay ment” (“ application for pay ment”) a nd submitt ed these to L atham, the arc hitect, and the B ank for approva l and payment. Eac h application for pay ment rec ited that the “origina l contra ct s um” was $650,000. Eac h application for pay ment

a lso li st ed th e a mou nt c omp le te d, the a mou nt d ue , a nd the re ma ini ng ba la nc e on the c on tr a c t. Attache d to eac h appli cation was a continuation shee t with a list of nineteen (19) items to be completed a nd the projected cost for each item that mirrore d Ex hibit B of the Ame ndment. I n one column, the ac tual amount expended on ea ch item was listed. In t h i s wa y , the ac tual cost of the Pr oje c t c ou ld b e c omp are d w ith the bu dg e te d p ri c e a s o f the date of e a c h a pp lic a tio n f

or pa y me nt. Ultimately , RBI

submitt ed eig ht ( 8) of these a pplications. Each w ere approve d by the ar chitect a nd

we re fu nd e d by the B a nk Th e fi na l app lic a tio n, date d Janu ary 12
, 19 99
, re fl e c ts that the tot a l c os t on the Project wa s $656,342, and that there was no ba lance due on the c ontrac t.

The re staurant ope ned on De cembe r 31, 1998. At that ti m e, t h er e we re a few rema ining minor construction items, which primarily involved landsca

ping. These were completed by J anuary 28, 1999.La t h am mak es n o c l ai m for t h e amou n t t h at s h e pai d RB I i n e x ce s s of $650, 000. 4

-4- Af te r c on str uc tio n w a s c omp le te d, RBI re qu e ste d th a t L a tham pay fo r a dd iti on a l c os ts inc ur re d o n th e Pr oje c t su bs ta nti a lly ov e r a nd abo ve the $6 50 ,0 00 c on tr a c t pric e . L a tham ha d p a id RB I a l i t t l e o v e r

$ 6 5 6
, 0 0 0
, a n d s h e r e f

u s e d t o p a y

a n y a d d i t i o n a l a m o u n t s f

o r t h e c o s to v e rrun s,
re ly ing on the “ ma ximum pric e ” of $6 50 ,0 00 se t ou t in the Am e nd me nt. 4

On June 20 , 2 00 2, RBI fi le d th is l a ws uit a g a ins t L a tham f

or br e a c h o f a

writt e n c on tr a c t, brea ch of a n oral c ontrac t, br eac h of an implied c ontrac t and brea ch of the obligation to deal in g ood faith. I n the alternative, RBI soug ht damag es base d on qu an tum me ru it , the value of service s provided. In the complaint, RBI al l eged that L atham wa s repe atedly informed that the budg et allowanc es we re in da ng er, a nd that she owe d RBI for the c ost overruns. It alleg ed that some of the ad d i t i onal costs on the Projec t resulted fr om unanticipated f actor s, such as the c hang e in building type re quired by

the city ’s building c ode and the excess rock f ound at the site whe re the foundation was to be la id. RBI

also contende d that additional costs arose out of items reque sted by L atham du ri ng c on str

uc tio n th a t w e re n ot i n th e orig ina l pric e , s uc h a s f urnitur e , f

ixtur e s, a nde qu ipm e nt. RB I a sse rt e d a s w e ll that it s la bo r c os ts inc re a se d du ri ng the fi na l six we e ks of the pr oje c t, b e c a us e L atham’s a c c o u n tan t h a d in s is te d th a t th e r e s ta u r a n t mu s t b e o p e n b e f

o r e th e e n d o f 1 9 9 8 , and

m ee t i n g t h i s d ea d l i n e r eq u i re d t h at cr ew s wo rk o v er t i m e. R BI co n ce d ed t h at “[ n ] o wr i t t en ch an ge order s were prepa

red f or these costs.” I t claimed, however
, that L atham wa s informed of and had

a pp r o v e d a l l o f

t h e a d d i t i o n a l c o s t s

. R B I a s s e r t e d t h a tt h e c o s to v e rru n s t o t a l e d ap p r o xi m a t e ly $112,000; however , it requested $57,000, t h e am o u n t of prof it origina lly

contemplated in the contra ct, plus the $30,000 that was spe nt on furniture, f ix tures, a n d eq u i p m en t . On September 9, 2002, L atham filed an answe r and a counter claim for damag es re sulting fr om claimed def iciencie s in construction.

On J anuary

26 and 27, 2004, a be nch trial wa s conducte d in the matter. Embury testified at trial about his dealin gs with L atham. He said that he he lped L atham deve lop her c oncept f or the restaur ant, plan the lay out, and deve lop a prelimi nary budg et. The pr eliminary budg et included f

our cate g ories of e x p en s es : construction ($511,773) ; site work ($96,320); f urniture, f

ix tures, and equipment, also ca lled “F , F, a nd E” ($2 4 7
, 7 0 0 ), an d start up costs ($38,950), w hich totaled an estimated $894,743 for

the entire Project.

Embury stated that he told L atham that his price for the Project would be ten per cent ( 10%) of the a ctual cost of c onstruction. This fee was re flec ted in the standar dized AI A document that he g ave to L atham, which he claimed he revie wed with L atham in detail. Embury rec og nized, however
, that his ha ndwritten notes on the AI A document provided for a g uara nteed maximum price “unde r Amendment I

Article I .”

Embu ry te sti fi e d th a t he sig ne d the Am e nd me nt on Ma y 12 , 1 99 8, in o rd e r t o a c c omm od a te L atham’s ne ed to have a contract t o show the Bank i n order to “wr ap up her financing .” He sa id that he explai n ed to L atham that he c ould not give he r a c ontrac t cost because the plans we re not complete. Ne verthe less, Embury testified, L atham ins isted that Embury provide he r with a c ontrac t-5-

to t ake to the B a nk . B e c a us e of L a tham’ s in sis te nc e , E mbu ry sa id, he fi lle d o ut the Am e nd me nt,

re fl e c tin g a

ma ximum g ua

rante e d pric e of $6 50 ,0 00
, bu t he qu a lif ie d the pric e by

a dd ing the pr ov iso that it was based on inc omp l et e p l an s . Ex hibit B, Embury explained, was an itemization of the construction cost a llowance s based on Ha sty ’s site p l an d eveloped on April 6, 1998, as we ll as Ar c hit e c t A nd e rs on ’s pr e lim ina ry dr a wi ng s o f the plans dr a wn in A pril 1 99 8. Th e $5 7, 17 1 in p ro fi t itemiz ed in the exhibit was 10% of the total of the other fig ures. Embury

said that he re viewed the first set of plans with L atham. He said that the cost of c onstruction was incr ease d beca use of the chang e in the plans fr om a Ty pe 6 building to a Ty

pe 5 building. Embry

asserted that construc tion of a Ty pe 5 b uil din g wa s mo re la

bo r int e ns ive a nd mor e c os tly

. He ma int a ine d that he e xpla ine d th is differ ence in c ost to L atham, and that, althoug h he did not “re call her rea ction,

. . . the indication was

we we re to proc eed.” Embury was not aw are of an y d i s cussi ons betwee n L atham and A rchitec t Ander son reg arding the cha nge i n t h e buil ding ty pe. The final plans we re c ompleted on J une 9, 1998.

Embury

also testified about the r ock in the foundation sit e that was d i scover ed soon af ter

e xca vatio n b e g a n. He sa id that L a tham w a s c a lle d to the sit e to s e e the pr ob le m a nddis c us s alternative solutions. Ultimately
, it wa s decide d that raising the elevation of the restaurant building would be less costly

than blasting the roc k to lay the foundation. The re fore , the building wa s elevated, and th e fr o n t p o rc h was c onverte d from a c oncre te slab to an e levated w ooden dec k. Embury estimated that the additional cost to raise the building wa s about $23,000. Embury said that L atham was made a war e of the chang es and w as told that “it will cost more money .” L atham responde d by

“nodding and what we took to be – g o ahea d and do it.”

Embury also claimed that L atham ag ree d to pay for the millwork provided by subcontrac tors on the projec t. H e noted that there was no item in Ex hibit B indicating that RBI had a c ommitm ent to provide the millwork, or “ F, F, and E,” a re fer ence to furniture, f ix tures and e quipment, which “can include every thing from a hostess counter to — to ba rs.” Embury

said that he ha d discussed the matter w ith L atham and had ex plained to her that she could g et t hose i tems at a lowe r price by dealing direc tly

with a ca binet maker . He said that L atham ag ree d to do so and indicated tha t she would also bid out the cabine try and the doors. L ater , howeve r, L atham wa s unable to g et bids for the millwork, so she asked E mbury to “do the millwork and bars a nd such as that.” The a dditional mil lw or k, Embu ry

state d, inv olv e d o the r i te ms d ic ta te d b ya n in te ri or de c or a tor

hir e d b y L a tha m, such as f alse be ams on the ce iling and spe cial pane ling on the w alls. Embury said that he re minded L atham that the millwork was not part of their contr act, a nd that there was no money in their contra ct fo r b uil din g the ba

rs a nd the oth e r i te ms. Embu ry te sti fi e d th a t L a tham r e sp on de d, “ the ba nk wi ll only loan me $650,000.” E mbury said that L atham “a g ree d we ne eded to g o ahea d and do it.”

L a tham a lso ne e de d to buy e qu ipm e nt f or the re staur a nt. Embu ry

te sti fi e d th a t sh e a sk e d h im whether he wor ked with any

equipment companie s. Embury rec ommended that L atham conta ct Ed Ca mpb e ll, a n e qu ipm e nt de a le r, wh o ha d wo rk e d on oth e r pr oje c ts wi th Embu ry

. Ca mpb e ll w a s p a id direc tly by L atham, not by

RBI

.-6-

Embury testified about other chang es that wer e made during construction that h e a l l eged incre ased costs and wer e approve d by L atham. He said that the initial plans showed m u l t i -p an el windows acr oss the front of the elevation of the building; these w ere chang ed to Fr ench door s. The

orig ina l pl a ns inc lud e d a

sta ir we ll f

ro m th e kit c he n to the ba se me nt; la te r p la ns eli min a te d th os e sta ir s, re su lti ng in i nc re a se d c os t. B e c a us e of the ro c k in the g ro un d w he re the found ati on wa s to be , r un nin g the se we r andwate r l ine s in vo lve d a n a dd e d e xpe ns e

. Uni den tifie d f a c tor s a lso

c on tr ibu te d to c os ts that we re a dd e d to the e le c tr ic a l c on tr a c t. In a dd iti on , in De c e mbe r 1 99 8, sh ortly befor e the r estaurant was sche duled to open, incleme n t we ather and below f ree zing temper ature s halted prog ress on the landsca ping and paving

. Consequently
, to e nable the restaur ant to open prior to the end of the y ear , RBI posted a $45,000 cashie r’s chec k with the Cityfor a temporary

use and occupancy permit. The check was released after six ty (60) day s. Embury asserted t hat L atham wa s informed about the additional costs related to a ll of these items, and sa id in fact that seve ral of the chang es we re dic tated by

L atham or he r mana g ement tea m.
Embury compiled a list of the extra costs on t h e P roj ect that we re c aused by the various

c ir c ums ta nc e s d e sc ri be d in his te sti mon y . T he y are a s f oll ow s:

1. Site Cost s $16,779 2. Additional landscaping and chang es to landsca ping $2,430 3. Rock at footing s/drilling/rock r emoval $23,677 4. Structural stee l chang es $450 5. Add’l labor and materia ls require d by “ty pe chang e” $14,433 6. Chang es of window to Frenc h doors $419 7. Plumbi ng chang es $4,150 8. Electric al cha ng es $4,135 9. Chang e of e ntranc e to wooden de ck $3,815 10. Gene ral c ondition additions such as insura nce, supervision, overtime, bonding , and cle an up labor $8,740 11. Furniture/fixt ure/e quipment and dec or $30,603

These additional costs totaled $109,109,631. Embury testified that the amounts cla imed by RBI for the extra costs wer e re asonable

. Embury also identified the e ight ap p l i ca tions for payment submitt ed by RBI , which we re
a dmi tte d in to e vid e nc e . H e sa id that th e y we re g e ne rate d in his of

fi c e a s th e inv oic e s ar

ri ve d in his office for pay ment. Embury sent copies of the applications to L atham for her rec ords, to Arc hitect Ander son for a

pproval, a nd to the Ba nk for pa y ment.
The last application fo r p ay ment was dated J anuary 12, 1999. I t included the same listi ng of items as in the o t h er ap p lications, except that it included two additional items: Equipm ent and Furniture. These items we re not include d in the orig inal list, and theref ore no a mount was budg eted for them. In t h e J an uary 1999 application, RBI

char g ed L atham $6,527 for “Equipment,” a nd $22,239 for “ Furniture” a ccor ding to this application. This application also re flec ted that RBI had-7-

ear n e d $ 5 7
, 0 5 3 f

o r “ Pr o f it a n d O v e rh e a d
, ” o u t o f a b u d g e te d $ 5 7
, 1 7 1
, d u r in g th e c o u r s e of the P roj ect . The J anu ary 19 99 app li cat io n fo r pay men t s ho wed th at t he t ot al a mo un t t o b e pai d t o R BI

wa s $6 56 ,3 42
, that the re we re no c ha ng e or de rs , a ndthat th e re wa s n o b a la nc e du e on the c on tr a c t. Embury conce ded that he did not have any discussions with L atham about the i ncre ased c osts when sh e wa s se nt this la st a

pp lic a tio n f

or pa y me nt, bu t ins ist e d that the y ha d pr e vio us ly “ ha d s ome pr e tty serious discussions about wher e the price of the projec t was g oing.” Embury said that L atham indicated that the Ba nk would lend only $650,000 for construction, and commente d that perha ps she could sell s o m e of he r prope rty or g et money

from her retire ment fund to pay

the costs over

that amount.
Embury testified that, af

ter th eJan u a

ry 12, 1999 final application for payment was submitted,

a no the r $ 68 ,2 07 in in vo ice s on the Pr oje c t w e re re c e ive d a ndpa id b y RB I ou t of RB I ’s fu nd s. Embury submitt ed into ev i d en ce a d ocument, Exhibi t 19, list ing the invoices that we re pa id after J anuary 12, 1999 by

RBI . At the trial, RBI

was pre pare d to offer

some, but not all, of the invoices to corrobor ate its payment of those amounts.

Th ro ug h E mbu ry , RB I

pr of fe re d a s evi de nc e a

le tte r d a te d M arc h 4 , 1 99 9 f ro m E mbu ry

to L atham. RBI claimed the letter demonstrated that L atham had ag ree d to pay RBI an a d d i t i o nal $80,113 over a nd above the $650,000 in twelve (12) pay ments of $6,676.08

. R BI contende d that L atham had stoppe d these monthly pay ments after

making the first payment. L atham objec ted to the admission of the letter into evidenc e. The trial court c oncluded that the Ma rch 4, 1999 le tter wa s an
a tte mpt a t c omp ro mis e a ndse ttl e me nt, a nddis a llo we d it s a dmi ssi on int o e vid e nc e on that ba sis

.

L ath am a ls o t est if

ied at t ri al. S he s aid th at when sh e began t alk in g wit h E mb uryabo utRBI manag ing the co n struction of the re staurant, she discussed with him the differ ence in a cost-plus contra ct and a

g uara nteed price co n t ract. She said that Embury told her that a c ost-plus contrac t could p o te n ti a ll y

b e le s s e xp e n s iv e , b u t s h e n e v e r th e le s s c h o s e th e f ixe d p r ic e c o n tr a c t. L a tha m
rec eived the sta ndardized AIA document f rom Embury , but she said he did not g o over it with her and she di d n o t re ca l l any handwritten notes on her c opy . L atham said that she sig ned the Amendment bec ause it contained the g uara nteed maximum price of $650,000, and that she neve r expected that she would owe RBI more than that amount. She maintained that she never rec eived from RBI any chang e orde rs, invoices, or othe r docume nts during c onstruction, o t h er than the applications for

pay ment with t h e co n t inuation sheets attac hed. L atham re ceive d all eig ht applications for

pay ment. She pointed out in her testimony that the applications for pay ment showed that her cost stay ed below the maxi mum price of $650,000 until the final applicatio n i n J an u ary 1999.

L atham testi fied that, during the course of c onstruction of the re staurant, Embury assure d her that th e Pr oje c t w as wi th in bu dge t, s a y ing , “ [i]t’ s lo oking g oo d. I t lo ok s li ke we ’r e c omi ng in under.” She acknow ledg ed that Embury told he r that chang es neede d to be made, but said that he indicated that the c hang es would save her mone y . L atham claimed that she di d not become a war e that Embury

wanted to be paid more tha n the $650,000 maxim um price until Dec ember 1998, when he “sta rted hinting . . . it might be a little bit over, but he never did say how much.” She sa id that-8-

Embury finally told her how much she was ove r the $650,000 max imum in late Februa ry or Mar ch 1999. L atham cla imed that, if she had known about the overa g e during construction, she w ould have cut items from the Projec t to keep it from g oing ove r budg et. L atham said that, prior to trial, she had not seen the list of cost chang es compil ed by Embury and int roduce d into evidenc e, nor had she seen the Marc h 4, 1999 letter purportedly sent to her by Embury

. After the lawsuit was f

iled, RBI sent counsel for

L atham some of the invoices re flec ting c osts on the Project, which totaled $279,597.85.

L atham testified that she a ssumed that, whether the restaur ant was c lassified as a Ty pe 6 or Ty pe 5 b uil din g , it

wo uldbe bu ilt

wi th f ir e pr oo f m a te ri a l, andind ic a te d th a t sh e didno t di sc us s w ith Embury any incre ase in pric e assoc iated with the chang e in the building type. With respect to the rock discove red w here the foundat i o n wa s t o be laid, L atham said that Embury told her that she could save betwee n $20,000 and $30,000 in blasting costs by elevating the restaur ant a f ew f eet. She

conce ded that Embury

indicated that ther e woul d b e d ifficulties in underg round plumbing, but

asserted that he late r told her that he had fig ured out a way to work ar ound it. L atham insisted that Embury did not tell her that the problems with the roc k would cause her to owe him more than the maxi mum price. In fac t, she stated, the $21,000 conting ency in the budg et was ba sed on the fa ct that

ro c k w a s d isc ov e re d, a ndthi s a mou nt wa s inte nd e d to c ov e r the re la te d c os ts. B y c ho os ing no t to bla st the ro c k, L a tham th ou g ht that th is c on tin g e nc y mon e y c ou ld b e us e d f

or oth e r i te ms.

L atham said that her decorator did some of t he work on the bartops, and that RBI finished them by laminating them. L atham paid her interior decor ator directly

. Be cause finishing the ba rtops

w a s i n t h e o r i g i n a l p l a n s , s h e a s s u m e d t h a tt h i s w o u l d b e R B I’ s r e s p o n s i b i l i t y.

L atham said that ther e we re c erta in expenses that she was not told she would have to pay over and above the maxim um $650,000, such as costs for the ar chitect, the e ng ineer , a sew er ta p and a fire hy drant, whic h cost about $43,000. L atham testified that she paid thos e ex p en s es out of the $650,000 loan, and c onsequently had to make the final pay ments to RBI out of her pe rsonal che cking

acc ounts. I n J une 1999, L atham wrote Embury a note telling him that she di d not intend to make any more pa y ments to RBI

over the contra ct price

.
On cross examination, L atham was asked about the Amendment she sig ned and w hether she

wa s a wa re of the pr ov iso that the state d ma ximum g ua rante e d pric e wa s b a se d o n in c omp le te pla ns

. She said that, at the time she signe d the Amendment, she “didn’t rea lly rea d” the pr ovision stating that the plans wer e incomplete, and said that Embury did not tell her that the maxim um price w as based on incomplete plans. L atham said that she t old Embury at t he ti me t hat s he had only $650,000 fo r c on str uc tio n. She su g g e ste d in he r t e sti mon y that E mbu ry

c ou ld have addedthe “ inc omp le te plans” lang uag e to the Amendme nt after she sig ned it, but ad m i t ted that the first set of plans was date d M a y

20 , 1 99 8, on e we e k af

te r the Am e nd me nt wa s sig ne d. She wa s a sk e d a bo ut a se pa rate continuation sheet submi tted to the Bank in support of the $250,000 portion of her loan de signated for “ Desig n, Furniture and Equipment.” She re cog nized that the continuation sheet showed that the

arc hitect, eng ineer , kitchen equipment, and furniture wer e to be paid from the $250,000, not fr om the $650,000 loan desig nated f or construc tion. W hen asked about t he bar, booths, hostess stand, and other similar items that RBI completed, L atham s ai d t hat, bec ause the se items wer e built into theE d A n d e rs o n is no t re la te d to T o m A n d e rs o n , t h e a rc h itec t. 5

La t h am own ed a B P G as s t at i on abou t 200 or 300 y ar ds f r om t h e s i t e of

t h e Proj ec t , a n d s h e oper at ed f r om 6

the re

.

T he t ri al t rans cri p t s ho ws t hat C am p b el l was sched ul ed to t est i f y a t tr i al
, b ut w as prevent ed f rom ap p eari ng 7

becau s e of

ha r s h w eat her condi t i ons

. T he part i es t oo k a post

- t r i al depo s i t i on an d s ubmi t t ed i t t o t he t r i al cour t i ns t ead

o f re q u iring C a m p b e ll to a p p e a r in p e rs o n

.
-9- floor, she thoug ht that they wer e part of the building. L atham maintained that she di d not remembe r Embury telling he r that she would owe him separately for that wor

k.

L atham testified that she neede d more equipment, and that Embury soug ht to obtain it from EdCa mpb e ll i n So uthCaro lin a . Sh e a g re e d tha t Embu ry wa s not r e sp on sib le fo r g e tti ng e qu ipm e nt.

Tom Ander son, the ar chitect on the Proje ct, testified as w ell. Arc hitect Ander son confirme d that he chang ed the arc hitectura l plans to make the restaur ant building a Ty pe 5 building, r ather

than a Ty pe 6, but he wa s unsure a bout the cost differ ence

. When r ock was discovere d on the job site, wher e the f

oundation was to be laid, Arc hitect Ander son discussed the situation with Embury , but not with L atham. He testified that the Projec t was complete d in a workma nlike fashion and

acc ording to the require ments and spec ifications of the pla ns that he dre w.

Ed Ander son (“Ed A nderson” ), RBI ’s construc tion superintendent, also testified at trial. He 5 stated that his job was to overse e the c ontrac tors on the construc tion of the Project. Ed Ande rson testified about som e of the cost incre ases a ssociated with construc ting a Ty pe 5 building a s opposed to a Ty pe 6 building. He stated that using the metal studs nece ssary for the T ype 5 building struc ture took mo re ti me to insta ll tha n th os e us e d in a Ty pe 6 s truc tur e . T ho ug h h e didno t kn ow the c os t

e ff e c t of the bu ild ing ty

pe c ha ng e in this Pr oje c t, he s aid th at in oth e r j ob s h e ha d w or ke d o n, it

w o u l d d o u b l e t h e c o s t o f c o n s tru c t i o n

. E d A n d e r s o n t e s t i f i e d t h a th e w a s o n t h e j o b s i t e e v e r y d a y,
an d t hat he wa s awa

re of the conve rsations betwe en Embury and L atham. B eca

use L atham’s business was just down the roa d, Embury would g o talk to L atham whenever an is sue needed to be addre ssed. He r eca lled the problem with the rock on the s ite, and noted that L atham wa s awa re of 6 the pr ob le m. E d An de rs on te sti fi e d th a t, a s th e c on str uc tio n c on tin ue d, L a tham a sk e d RB I to b uil d

c us tom ba rs up sta ir s a nddo wn sta ir s, ins ta ll b oo ths , d e c or a te , h a ng pi ctur e s, a ndoth e r s uc h ta sk s. Ed Ander son d i d n o t know whethe r those tasks we re c ontemplated in the orig inal contra ct. He

asserted that a g ood deal of overtime was worke d on the Project in an eff ort to open the re staurant by the end of 1998. L ike Arc hitect Ander son, Ed Ander son believed construction on the Project wa s do ne in a wo rkma nli ke fa sh ion c on sis te nt w ith the plans a ndsp e c if ic a tio ns

.

Th e de po sit ion of

e qu ipm e nt d e a le r Ed wa

rdC. C a mpb e ll ( “ Ca mpb e ll” ) w a s a dmi tte d in to

e vid e nc e to s ho w h is i nvol vem ent i n th e pr oje c t. Ca mpb e ll t e sti fi e d th a t he ha d w or ke d w ith 7 Embury on projec ts in the past, and that Embury had cont ac t ed him to obtain some kitchen equipment for the L ight House Project. Campbell had a c ouple of mee tings with L atham and the n with the g ener al manag er of the restaur ant, Travis Roberts (“Roberts”). Eventually
, he sold L athamC amp bel l l at er t es t i f i ed t hat t he s uppl i es coul d hav e c ost $96
, 28 4, but he coul d not r ememb er t he exa ct pri ce. 8

-10- abo ut $ 12 0, 00 0 w orth of e qu ipm e nt. He sa id that the ve nt h oo ds we re fu rn ish e d b y RB I . H e a lso 8 stated that RBI installed the equipment beca use he, Campbell, was too expensive and Embury had employ ees w ho could d o i t

. C am p bell said that the price of the e quipment did not include installation costs.

On Ma rc h 10, 20 04 , the tr ia l cou rt e nte re d an or de r fi nd ing in fa vo r o f L a tham a nda g a ins t RB I on its c omp la int . T he tr ia l c ou rt state d, “ Th e Cou rt

sp e c if ic a lly fi nd s th a t th e c on tr a c t w a s a fix ed pric e construc tion contrac t , t h e P l aintiff g ave c ontinuous assurance s, both orally and by documentation, and a lleg ations by Plaintiff of extras or additions was not shown by a pre pondera nce of the e vid e nc e in l ig ht o f the e xhibi ts a ndte sti mon y .” Th e tria l c ou rt la te r ame nd e d it s o rd e r t o
c on fi rm that it wa s a lso dis mis sin g L a tham’ s c ou nte rc la im. F ro m th a t or de r, RB I no w a pp e a ls.

On app e a l, R B I arg ue s tha t the tr ia l c ou rt e rr e d in c on c lud ing that th e pa rt ie s h a d e nte re d in to

a fi xedpri ce c on str

uc tio n c on tr a c t. R B I

c on te nd s th a t th e Am e nd me nt w a s to o in de fi nit e a s to materia l terms to be enf orce able, an d n otes that the parties did not ex ecute any other written

a g re e me nt. RB I

c la ims that th e Am e nd me nt c ou ld n ot b e c on sid e re d a fi na l c on tr a c t, b e c a use it provides spec ifically

that it wa s based on plans that had not be en completed. RBI also arg ues that the proof show s that it incurred $30,0 0 0 in expenses on furniture, f ix tures, and e quipment which

wer e bey ond the scope orig inally contemplated by

RBI and L atham. Be ca u s e there was no enfor cea ble contract, R BI arg ues, t he trial court should have imposed a quasi-contr actua l obligation upon L atham to p ay R BI a re asonable amount to prevent unjust enric hment. RBI contends that additional compensation in the amount of $80,113 would be rea sonable compensa tion. RBI further arg ues t hat t he trial c ourt err ed in disallowing the admission into evidence of the Marc h 1999 letter, in which RBI

claims that L atham ag ree d that she should pay RBI $80,113 for the a dditional goods and ser vices provide d by

RBI

.

I n response , L atham ar g ues that the Ame ndment constituted the parties’ ag ree ment, and that the g uara nteed maxi mum price of $650,000 is e nforc eable

. She further arg ues that, eve n if there was no written contra ct betwee n the parties, there was an ora l ag ree ment that RBI perf orm its services fo r a guar antee d maxi mum price of $650,000, a s is evidence d by the Amendment a nd by

RBI ’s applications for

pay ment. Moreove r, eve n if no cont ra ct ex isted betwee n the parties, L atham

c ontends, the app ro xima te ly $6 57 ,0 00 that sh e ha s a lr e a dy pa id R B I

is m or e than r e a so na

ble compensation for RBI ’s servic es.

We r e vie w the tr ia l c ou rt ’s fa c tua l f ind ing s de novo o n t h e r ec o rd
, p re s u m i n g t h o s e f i n d i n gs to be corr ect unless the evidenc e preponde rate s otherwise. We review questions of law de novo , w ith

no su c h p re su mpt ion of

c or re c tne ss. Te nn . R. Ap p. P. 1 3( d) ; se e Stric kla nd v . Ca rtw right , 117 S.W .3d 766, 771 (Tenn. Ct. App. 2003).

Our Supreme Court ha s explained that a contra ct must be sufficie ntly definite in order to be

e nf or c e d:-11-

A c on tr a c t mu st re su lt fr om a me e tin g of the min ds of the pa rt ie s in mutua l a sse nt t o the terms, must be based upon a sufficie nt c onsideration, fre e from fraud o r u n d ue influence , not ag ainst public policy and suff iciently definite to be e nforc ed. I ndefinitene ss reg arding an essential element of a c ontrac t may preve nt the cre ation of a n e n f o r c e ab l e c o n tr a c t

. A c o n tr a c t m u s t b e o f s u f f i c i e n t e xp l i c i t n e s s so tha t a court c an per ceive what ar e the r espec tive obligations of the parties.

Doe v . HCA H

ealth Services of Te nn., I nc. , 46 S.W .3d 191, 196 (Tenn. 2001) ( ci t at i o n s and qu otatio ns omi tte d) . In de te rm ini ng wh e the r the pa rt ie s mutua lly a sse nte d to the te rm s o f a c on tr a c t, “courts must applyan objec tive standard ba sed on the parties’ manife stations.” Sta uba c h Re tai l Servs.-South east, LLC v. H.G. Hill Realty Co. , 160 S.W .3d 521, 524 (Tenn. Ct. App. 2005). “ [T] he law lea ns ag ainst the destruc tion of contrac ts for unce rtainty , espec ially wher e one of the parties has perf ormed his part of the contra ct.” Book-Mart of F lorida, Inc. v. Nat’l Book Warehouse, Inc. , 917 S.W. 2d69 1, 69 4 ( Te nn . Ct . A pp . 1 99 5) ; see APCO Am usem ent Co. v. Wilki n s Fa m ily Rests. of Am ., Inc. , 673 S.W .2d 523, 528 (Tenn. Ct. App. 1984).

We must first determine what, if any , contra ct exis ted betwe en the pa rties, using an objec tive sta nd ard ba se d on the pa

rt ie s’ ma nif

e statio ns

. We loo k fi rs t to the Am e nd me nt, wh ic h p ro vid e s th a t, based on inc omplete plans, RBI will manag e the c onst ru ct i o n o f t he Projec t for L atham for a g ua rante e d ma ximum

pric e of $6 50 ,0 00

. Exhi bit B to the Am e nd me nt list s th e ite ms c on sid e re d in the maxim um price a nd includes RBI ’s “Profit and O verhe ad” and conting encie s. Notably , the

“ Am e nd me nt” do e s n ot a c tua lly a me nda ny

oth e r v a lidc on tr a c t, s o it s terms a re lim ite d to tho se stated there in. Subsequent to the execution of the Amendment, the building ty pe wa s chang ed, roc k was discove red w here the foundation was to be laid, and othe r cha ng es ar ose that af fec ted the orig inally anticipated cost of the Project. Neve rtheless, even afte r these problems arose and the plans had long been f

inalized, RBI

sent out eig ht applications for pay m en t, all rec onfirming that the contra ct price for c onstruction of the Projec t was $650,000, that there wer e no chang e orde rs, and that RBI was e x pecte d to pay

for the items listed in Ex hibit B of the Ame ndment.

The pa rties’ testimony

reg arding the ora l r ep re sentations of Embury and L atham wa s contra dictory . Embury

testified that every t i m e a c hang e incr easing the price of construc tion

occur red, he informed L atham that ther e would be a price incre ase a nd L atham neve rtheless dire cted him to procee d. L atham disputed this, testify ing that Embury did not tell her that a ny

of the c hang es would result i n a hig her c ontrac t price f or her . Rather, she said, Embury indicated that the c hang es in the const ruction would save her mone y . Moreove r, Embury conce des that he ne ver discusse d spec if ic a mo u n ts w ith L a th a m d u r in g c o n s tr u c ti o n , a n d th a t L a th a m d id n o t s p e c if ic a ll y s ta te that she ag ree d to pay

for items that would re sult in a contrac t price in e x cess of $650,000.

To the extent that the parties’ testimony is c ontradictory , we must assume that the tria l court implici t l y cr ed i t ed L atham’s testimony . The trial c ourt’s asse ssment of the cr edibilityof the witnesses i s, of course, accorde d g reat defe renc e on appeal. Se e Mit c he ll v . Ar

c hib old
, 9 7 1 S. W. 2d25 , 2 9 ( Tenn. Ct

. App. 19 98 ). With app ro pria te de fe re nc e to t he tr ia l c ou rt ’s imp lic it determinations of credibility
, we must conclude that the evidenc e does not pre ponderate ag ainst theT o the e x te n t tha t R B I cla im s d a m a g e s fo r fur n iture a n d e q u ip m e n t i n a d d iti o n to the se a m o u n ts c h a rg e d to 9

L a tha m , w e fi n d the e v id e n c e insu ff ic ie n t t o su p p o rt R B I’s c la im

.

-12- finding that the parties enter ed into a contra ct for the construction of the Project fo r a gu aranteed

m a x i m u mp r i c e o f

$ 6 5 0
, 0 0 0
, w h i c h i n c l u d e d t h e i t e m s l i s t e d i n E x h i b i tB o f t h e A m e n d m e n t

. In addition to the terms set out in the Amendment, the subseque nt c onduct of the parties wa s consistent with those stated terms that RBI ag ree to manag e the co n struction of the Projec t for a ma x imum price of $650,000. Eac h of the eig ht applications for pay ment, g ener ated by RBI , list t he contr act pric e a s $ 65 0, 00 0, a ndstat ed tha t th e re we re no c ha ng e or de rs du ri ng c on str uc tio n. Th e on ly

e vid e nc e c on tr ary to su c h a n a g re e me nt is Embu ry ’s te sti mon y that he inf orme d L a tham pe ri od ic a lly of c os t in c re a se s, a ndthat sh e ind ic a te d to him th a t th e Pr oje c t sh ou ld p ro c e e d d e sp ite the inc re a se in cost

. Ho we v er , as noted above , L atham neve r spec ifically ag ree d to pay

RBI an amount over $650,000, no chang e order s wer e ever signe d, and ther e is no testimony that Embury

ever discussed with L atham the amount of any such incre ases in c ost until the constructi o n wa s compl ete. Furthermore
, RBI submitt ed into evidenc e only a portion of the invoice s in support of its claim that L a tham ow e s mo re than $ 65 0, 00 0. Th e re fo re , w e fi ndthat th e e vid e nc e does no t pr e po nd e rate ag ainst the t rial court’s finding that the parties had a meeting of t he minds reg arding the maxim um contra ct price of $650,000, and that the items list ed in Exhi bit B we re inc luded in that price

.

We mus t di sc us s sep arate ly RB I ’s c la im r e la te d to e qu ipm e nt andfu rn itu re , b e c a us e it i s undisputed that those ite m s we re n o t cover ed in Exhi bit B to the Amendme nt or in any of the

app lic a tio ns fo r p a y me nt ex cept f or the fi na l app lic a tio n. I nd e e d, mos t of the e vid e nc e on the se items is essentially

unref uted in the re cord. Embury ’s testimony , L atham’s testimony , and the tria l exhibi ts all indicate that L atham intended to pay for e quipment and fu rniture e x penses out of the $250,000 “De sign, Furniture a nd Equipment” portion of he r B ank loan, not out of the $650,000 borrowe d for the c ost of construction. Campbell was paid over $100,000 for the e quipment provided by his company , and he w as paid o u t of the $250,000 portion of the loa n. RBI ’s final a pplication for pay ment, which included amounts for “Equipment” and “F urniture,” resulted from RBI building the bars, completing the m illwork, and ins talling the kitchen equipment. I n the final application for pay ment, RBI

invoiced L atham for

these i t ems , listi ng $6,527 for “ Equipment” and $22,239 f or “F urniture,” for a tot al of $28,766. At trial, L atham conc eded that pay ments for e quipment and furniture wer e to be made out of the $250,000 portion of her Ba nk loan, and she did not dispute that RBI had per formed the work re lated to t hese charg es. I t is appar ent from the undisputed e vidence that the $28, 7 6 6 a mo u n t r e q u e s te d b y RB I f o r th e s e it e ms s h o u ldh a v e b e e n p a ids e p ar a te ly a nd sh ou ld n ot h a ve be e n ta

ke n f ro m th e $6 50 ,0 00 ma ximum c on tr a c t pric e fo r c on stru c tio n c os ts. 9 There f o r e , w e r e v e r s e th e tria l c o u r t’ s f in d in g o n th is c o mp o n e n t o f RB I ’ s c laim e d d a ma g es and

re ma ndto the tr ia l c ou rt

to e nte r a

jud g me nt i n f

a vo r o f R B I

fo r $ 28 ,7 66 owe d by L a tham w ith

re sp e c t to the se ite ms.

RB I c la ims that th e re wa s n o c on tr a c t be tw e e n RB I a ndL a tham, and th at RB I the re fo re is entitled to the rea sonable va lue of its service s under a theory of qu an tum me ru it . Howeve r, we have determined that the parties had an e x isting contra ct re g arding the subject matter for whic h RBI

seeks-13-

to rec over. The ref

ore, the doctrine of qu an tum me ru it is inapplicable, a nd this arg ument must be reje cted. Se e Swaf

fo rd v . Ha rri s , 967 S.W .2d 319, 324 (Tenn. 1998)

. Finally , RBI

arg ues that the t ri al co u rt err ed in excluding f rom the evide nce the Marc h 4, 1999 letter indi cating that the parties had an ag ree ment for L atham to pay $80,113 in addition to the $ 6 5 0
, 0 0 0
, b ec au s e i t re l at ed t o an at t em p t t o co m p ro m i s e o r s et t l e a d i s p u t ed cl ai m

. T h e t ri al j u d ge commented, “ I

just heard y our client testify that he came up with a compromised fig ure just to g et it out of the way . He a ssumed financ ial hardships and he felt lucky in ge tting a le sser a mount and just ge t out. . . . This is all settlement compromise a ttempts on both parts.”

Te nn e sse e Rul e of

Ev ide nc e 40 8 p ro vid e s:

Evidence of (1) furnishing or off ering to furnish or (2) ac cepting or off ering to acc ept

a va lua ble c on sid e ratio n inc omp ro mis ing or a tte mp tin g to c omp ro mis e a c la im, whether in present litigation or relate d litigation, whi ch cla im was disputed or wa s
re a so na bly e xpe c te d to be dis pu te d as to eithe r va lid ity or a mou nt, is n ot a dmi ssi ble to p ro ve lia

bil ity fo r o r i nv a lid ity

of a c ivi l c la im o r i ts a mou nt.

Tenn. R. Evid. 408.

We mus t c on c lud e that th e le tte r w a s p ro pe rl y e xclu de d a s e vid e nc e of

a n atte mpt

to s e ttl e or compromise RB I ’s claim to additional funds. Embury testified that the letter

memorialized the parties’ ag ree ment that L atham owe d additional funds, and that it mere ly set o u t t h e t er ms of L atham’s pay ment schedule . Embury also testified, howe ver, tha t he re duced the full amount claimed be cause the re staurant wa s not doing we ll and he thoug ht that his “ best cha nce in g etting the

mon e y ou t w a s to a g re e to h e r p a y ing us ou r o ri g ina l f e e .” This i nd ic a te s E mbu ry ’s int e nt t o compromise a c laim that he thoug ht was “reasona bly expected to be disputed.” In light of this, we aff irm the trial court’s decision t o exclude the l etter as evidenc e of c ompromise or settlement under Tenne ssee Rule of E vidence 408.

The de cision of the trial court is affirme d in part, re verse d in part, and r emande d for the trial

c ou rt to e nte r a jud g me nt i n fa vo r of RB I fo r $2 8, 76 6. 00

. Cos ts o n a pp e a l are to b e ta xede qu a lly to Appellant Retail B u il d e r s , I nc., and its sure ty , and Appe llee Mar g are t L atham, for which execution

m a y i s s u e , i f

n e c e s s a r y.

___________________________________ HOLL Y M. KI RBY, JUDGE