Opinion ID: 779684
Heading Depth: 2
Heading Rank: 2

Heading: Claims for Additional Compensation

Text: 13 Remaining counts two through four relate to Hall's claim for additional compensation arising from the unexpected volume and composition of debris in the spillway cells.
14 Hall first contends that Entergy's refusal to pay additional compensation for Phase One constitutes a breach of contract. Entergy argues in response that, by failing to comply with contract procedures, Hall has waived any claims for additional compensation. RAD-Razorback Limited Partnership v. B.G. Coney Co., 289 Ark. 550, 713 S.W.2d 462, 466 (1986), states the applicable Arkansas law on this point: The general rule pertaining to construction contracts is, absent a waiver ..., if it is required, a request for additional compensation must be in writing and cannot be made after the work is completed. Hall does not dispute its failure to comply with change-order procedures, but argues instead that Entergy (1) waived strict compliance through its course of conduct, and (2) had actual knowledge of the debris conditions in the spillway cells. 15 Section 6.4 of the contract clearly states: Contractor hereby waives all claims for schedule extensions or additional compensation beyond that allowed in this Agreement or by a Contract Order, unless the claim is expressly authorized under this Agreement and is made in accordance with the following procedures. Sections 6.2, 6.4, and 37.3 then provide detailed procedures for the submission, approval, and payment of such claims. But according to Hall, Entergy would normally first approve change-order requests orally. Hall would only commence the written change-order procedures after it had obtained oral approval. It would then memorialize the modification with the required paperwork. Hall claims that Entergy denied Hall's initial request for additional compensation arising from the debris conditions, thus rendering a written request futile. The district court found, however, that Hall had simply not met its burden of showing that the custom, practice and conduct of the parties was that written requests would only be made once oral approval had been received and so there is no basis for a finding of waiver. We agree. 16 Even accepting Hall's evidence of waiver at face value, 3 Hall has not presented evidence sufficient to create a fact question or to justify a finding of waiver under Arkansas law. In Rivercliff Co. v. Linebarger, 223 Ark. 105, 264 S.W.2d 842, 846 (1954), the Arkansas Supreme Court found that a waiver had occurred where several changes had been made and paid for during the construction ... yet ... only one written change order had been made. Likewise in J.N. Heiskell v. H.C. Enterprise, Inc., 244 Ark. 857, 429 S.W.2d 71, 74-75 (1968), the court found that a fact question as to waiver was properly submitted to the jury where the contractor had presented evidence that oral changes were approved and paid for on many occasions. Finally, we held in Falcon Jet Corp. v. King Enterprises, Inc., 678 F.2d 73, 77 (8th Cir.1982), that waiver had occurred where virtually all changes had been approved orally. In contrast, it is undisputed in this case that Hall submitted several change orders, and Entergy paid them, according to the contract procedures, while there is no evidence that Entergy ever approved and paid for any changes without the required paperwork. The district court correctly found the evidence of waiver insufficient to create a triable question of fact. 17 Hall's contention that Entergy had actual knowledge of the debris conditions and therefore cannot equitably require compliance with contract procedures is likewise without merit. The two cases Hall cites on this point, St. Louis, I.M. & S. Ry. Co. v. Shepherd, 113 Ark. 248, 168 S.W. 137 (1914), and Marion County Rural School District No. 1 v. Rastle, 265 Ark. 33, 576 S.W.2d 502 (1979), are inapposite. First, neither of these cases involve contractually required change-order procedures. Second, and more importantly, the contracts at issue in the cases are not construction contracts. RAD-Razorback definitively establishes that, absent a waiver, change-order provisions in construction contracts will be strictly enforced in the state of Arkansas. 713 S.W.2d at 466. We find that Hall has not provided sufficient evidence to create a fact question on whether Entergy waived compliance with change-order procedures. By failing to comply with those procedures, Hall forfeited its right to seek additional compensation under the contract.
18 Hall next contends that the contract should be reformed because it was the result of a mutual, material mistake as to the volume and composition of debris in the spillway cells. Under Arkansas law, parol evidence is admissible to establish a mutual mistake, but must be clear and convincing before reformation is justified. Mizell v. Carter, 255 Ark. 960, 504 S.W.2d 743, 745 (1974). In the aggregate, Hall's evidence on this point is not clear and convincing, but establishes only that Entergy sources occasionally expressed opinions or estimates about the debris in the cells. 19 Moreover, the contract unequivocally allocates the burden of inspection and the risk of mistake to Hall. The Restatement (Second) of Contracts § 152(1) (1979) states that a mutual mistake renders a contract voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in § 154. According to section 154, [a] party bears the risk of mistake when ... the risk is allocated to him by agreement of the parties. This is clearly the case here. Section 37.1 of the agreement requires Hall to make its own inspection and assessment of the nature and quantity of surface and subsurface materials to be encountered and the equipment and facilities needed preliminary to and during performance. And section 37.2 states that information provided by Entergy does not relieve Hall of its duty to inspect. Under both the contract and the Restatement, Hall clearly bore the risk of mistake. While no Arkansas case expressly adopts section 154, the district court correctly applied Crookham & Vessels, Inc. v. Larry Moyer Trucking, Inc., 16 Ark.App. 214, 699 S.W.2d 414, 416-17 (1985), which essentially employs a pre-existing duty approach: `Where one agrees to do, for a fixed sum, a thing possible to be performed, he will not be excused or become entitled to additional compensation because unforeseen difficulties are encountered.' Id. (quoting Baton Rouge Contracting Co. v. West Hatchie Drainage Dist. of Tippah County, 304 F.Supp. 580, 585 (N.D.Miss.1969)). 20 Hall's argument that its inspections were reasonable and that it reasonably relied on Entergy's representations is without merit. The contract squarely placed the risk of uncertainty as to site and soil conditions on the contractor. Green Const. Co. v. Kan. Power & Light Co., 1 F.3d 1005, 1009 (10th Cir.1993). And the fact that Entergy invited bids on a time-and-materials basis in order to allow for changed conditions is further evidence that Hall assumed the risk of changed conditions by submitting a lump-sum bid. The district court correctly granted summary judgment in Entergy's favor on count three.
21 Hall next argues that, even if there was no breach of contract or mutual mistake, Entergy has been unjustly enriched by Hall's and HSI's extra work on Phase One. We reject this argument. Under Arkansas law, the doctrine of unjust enrichment does not apply when there is a valid, legal, and binding contract. See Lowell Perkins Agency, Inc. v. Jacobs, 250 Ark. 952, 469 S.W.2d 89, 92-93 (1971). Arkansas courts have recognized some exceptions to this general rule. Friends of Children, Inc. v. Marcus, 46 Ark.App. 57, 876 S.W.2d 603, 605 (1994). For example, restitution might be available where the parties to a contract find they have made some fundamental mistake about something important in their contract. Id. But since the district court found, and we agree, that there was no mutual mistake in the formation of this contract, there is no basis for resorting to quasi-contract. Hall's argument to the contrary is without merit; it repeatedly cites cases that permit restitution despite contracts that are void. Friends of Children represents the Arkansas rule for cases with valid contracts. The district court properly granted summary judgment for Entergy on count four.