Opinion ID: 2229760
Heading Depth: 1
Heading Rank: 6

Heading: Acceptance of Performance as Waiver

Text: Lange argues that because Hallam used the elevator facility from September 1986 through the time of trial in early 1991, Hallam cannot avoid its obligations on the basis of defective or insubstantial performance. Lange argues that one of the conditions preprinted on the back of its purchase orders states: (14) Occupancy or use of the building by purchaser before completion will constitute acceptance of the building and payment in full required at that time. In City of Gering v. Smith Co., 215 Neb. 174, 337 N.W.2d 747 (1983), we held that an express or implied acceptance of work as in compliance with a building contract operates as a waiver of defective performance, but this rule is inapplicable where the acceptance was under protest or induced by fraud, or where the defects were latent and unknown to the owner. Hallam began elevating grain into the facility in late September 1986, before Lange completed construction of the facility. Holsing testified that he used the four grain bins and elevator system continuously from late September 1986 through the time of trial in early 1991. Under the rule in City of Gering, supra, this use of the facility does not necessarily constitute an express or implied acceptance of work as in compliance with a building contract. Holsing testified that Lange was told of the initial problems moving grain as soon as the problems arose. Holsing also said he talked repeatedly with a Lange foreman about the aeration fans' needing to be wired to the electrical supply. William Lange acknowledged that Holsing was always wanting something done and that Holsing complained primarily about not getting bushel capacity out of the elevator. In light of these ongoing complaints and communications, Hallam's use of the facility did not imply that it had accepted the facility as being in compliance with the agreement so as to preclude an assertion of insubstantial performance. See, Lofton v. Don J. Trahan, Inc., 399 So.2d 818 (La.App.1981); O.W. Grun Roofing & Const. Co. v. Cope, 529 S.W.2d 258 (Tex.Civ.App.1975). There was evidence that the facility suffered from latent defects, which surfaced only after Hallam began using the facility and after Lange had left the construction site in December 1986. Evidence of the cause of the defects, a material issue of fact, is in conflict. Holsing testified that it was after Lange left the construction site that water first began entering the leg pit, that the temperature cables broke, that the side draws malfunctioned, and that the bins ruptured. Even if Hallam did accept Lange's performance when it started elevating grain in September 1986 or when it continued using the facility after Lange left the site, Hallam is not precluded from claiming insubstantial performance as to these latent defects. See Smith v. Erftmier, 210 Neb. 486, 315 N.W.2d 445 (1982). Moreover, Hallam's continued use of the facility after it became aware of the above-cited problems does not preclude Hallam from asserting insubstantial performance of the construction contract because of Hallam's duty to mitigate its damages. When there has been a breach of a contract by one party resulting in a loss to the other, it is the duty of such other party to take all reasonable steps to reduce the amount of his damages. Erftmier, supra . Holsing testified that prior to negotiating for construction of the bins, Hallam contracted to store about 640,000 bushels of milo for local farmers in anticipation of the increased storage space the facility would provide.