The Cost of 24 Hours: Abandonment Did Not Excuse Failure to Give Proper Termination Notice

Although a sub apparently abandoned a project, breaching its subcontract, the general contractor’s failure to give 48 hours’ termination notice required by the subcontract was also a breach (it had given 24 hours’ notice). The trial court decision was previously recapped here, and the Connecticut Appeals Court has affirmed the trial court ruling in all material respects. The sub was Semac Electric and the GC was Skanska USA Building.

This was a complex hospital project, with hundreds of changes and schedule delays. Semac claimed that the changes amounted to a cardinal change (which the court subsequently rejected). After apparent abandonment of the project by Semac, Skanska gave notice of default and terminated the subcontract 24 hours later.

On appeal, Skanska claimed that Semac had signaled in six different ways its abandonment of the project, and was not entitled to the 48-hour cure period: “Skanska argues, however, that, for various reasons, Semac was not entitled to a forty-eight hour cure period. We disagree.” The court noted that there was no exception or qualification to the termination process. And relative to Skanska’s argument that it should not have had to wait the additional 24 hours under the circumstances, the Appeals Court said it would “decline to speculate that waiting the additional hours required under the contract would have been futile.”

The parties had stipulated to the cost incurred by Skanska in completing Semac’s work, of about $26 million. Skanska’s failure to wait the additional 24 hours to issue the notice of termination, though, came at the cost of recovering its overrun against Semac. The court upheld longstanding CT law: termination must strictly follow the contract terms.

The case is Semac Elec. Co. v. Skanska USA Bldg., Inc., 2020 Conn. App. LEXIS 35 (Feb. 11, 2020). The cost of 24 hours? About $26 million.