SW Legal studies in Business

Beneficiary of Improperly Assigned Contract Must Pay For Value of Goods Received
Description

Appeals court held that while the assignment of a contract was improper, since the new subcontractor provided the goods requested, the party that received the benefit of the goods would pay for the value received under the theory of quantum meruit.

Topic Contracts
Key Words

Surety, Assignment, Quantum Meruit

C A S E   S U M M A R Y
Facts

Albea was general contractor on a state highway project. It subcontracted with APAC, an asphalt company. The contract stated it could not be assigned without Albea's consent. Albea and its sureties, Western Surety and Continental Casualty, executed a $24 million payment bond providing that they were liable for all persons and work related to the project. During the project, the price of asphalt and fuel increased significantly. Albea and APAC got into disputes over payments. While the job was ongoing, APAC sold and assigned its assets, including the contract, to Matthews Contracting. Albea was informed of the assignment and while it did not approve of it, it allowed Matthews to work so the job could proceed. Matthews demanded higher payments for asphalt and Albea agreed because no other contractor would step in at the original price. Albea lost money on the job and could not pay its bills, so the sureties paid Matthews $2.7 million. APAC sued Albea and its sureties for $1.2 million for work performed before the contract was assigned to Matthews. The trial court granted APAC summary judgment against defendants for $1.2 million. On appeal, defendants argued that APAC breached the contract by its assignment without consent.

Decision

Affirmed. It was a breach for APAC to assign the contract without consent, but the anti-assignment clause had no impact since Matthews provided the asphalt APAC originally had promised to deliver. An anti-assignment clause is to protect a party from a material reduction in the value of a contract, which did not happen here. Quantum meruit is an equitable doctrine based on the concept that no one who benefits from the labor and materials of another should be unjustly enriched thereby. Since it applies here, APAC may recover the reasonable value of the goods provided. Hence, if Albea cannot make good on payments due, the sureties must cover the costs of services provided by APAC. The liability of the sureties is the same as the liability of Albea.

Citation Western Surety Co. v. APAC-Southeast, ---S.E.2d--- (2010 WL 118087, Ct. App., Ga., 2010)

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