Doctrine of “Patent Ambiguity” Bars Contractor’s Substantial Claim For Extra Work

The Appellate Division recently affirmed a trial court’s granting of summary judgment in favor of the County of Union (the “County”) on a contractor’s extra work claim for $631,895.27 arising from an ambiguity in the contract specifications.  The Court found the ambiguity to be a patent ambiguity, which A. Juliano & Sons, Inc. (“Juliano”), the successful bidder to whom the contract was awarded, should have recognized and raised with the County prior to the submission of its bid.  Having failed to identify and raise that ambiguity with the County, Juliano was barred from seeking  payment for extra work that was based on its interpretation of the ambiguity in the contract specifications.

In Aspen Landscaping Contracting, Inc. v. A. Juliano & Sons Contractors, Inc., Docket No. A-5436-11T2 (Aug. 9, 2013) (the “Aspen Case”), plaintiff, a subcontractor of Juliano, the general contractor, sought recovery of certain amounts due from Juliano and the County relating to a project to establish a public park in Clark, New Jersey (the “Project”).  Juliano filed a cross-claim against the County asserting entitlement to payment for extra work.  Juliano’s claim related to amounts claimed due for the cost of borrow excavation material at the Project.  The trial court granted summary judgment to the County, concluding that because Juliano’s change order for the borrow material was based on Juliano’s resolution of a patent ambiguity in the bid documents not brought to the attention of the County as required by the specifications, the relief Juliano sought was barred by the “patent ambiguity doctrine.”  The Appellate Division affirmed that decision.

A patent ambiguity in a publicly bid contract is one that “either (1) would have been apparent to reasonable prospective bidders from the facts available, or (2) was in fact known to the contractor before submitting its bid.” D’Annunzio Bros., Inc. v. N.J. Transit Corp., 245 N.J. Super. 527, 534 (App. Div. 1991).  Where the ambiguity is patent, the bidder has a duty to inquire and the failure to do so bars a claim based on the contractor’s resolution of the ambiguity.

In the Aspen Case, the court considered the bid form, specifications, certifications, post-bid correspondence and deposition testimony to determine the extent of the ambiguity and concluded that there was a glaring ambiguity that a reasonable bidder would have recognized.  The specifications provided that the bidders were required to bring any apparent ambiguity, inconsistency, error, discrepancy or omission to the attention of the engineer at least seven (7) working days before the opening of bids.  Neither Juliano nor either of the other two bidders requested information or brought any problem with the bid documents to the attention of the engineer prior to submitting a bid.

The ambiguity in the bid documents arose because the documents sought a unit price for a specified quantity of only one type of borrow excavation material, namely “select” material, while, elsewhere, the specifications referenced two types of borrow excavation material – “select” material and “zone 3” material.  The specifications never noted a specific quantity of “zone 3” material and did not seek a unit price for the “zone 3” material.  The Court found the reference to two types of borrow material to be in direct conflict and inconsistent with other provisions of the bid documents.  The Court further noted that the failure to include an item on the bid form calling for a price for “zone 3” material to be blatant conflict, which was a glaring ambiguity.

The Court concluded that a reasonable contractor would have noted the glaring problem with the two types of borrow material and either declined to bid or requested a clarification from the County engineer as the bid specifications directed.  The Court found Juliano’s interpretation of the conflict in the bid documents, which led to the claims for extra work, not to be reasonable.  As a result, the Court affirmed the trial court’s conclusion that Juliano’s claim is barred by the patent ambiguity doctrine.

The Aspen Case emphasizes the importance of a contractor’s vigilance in reviewing the contract specifications prior to submitting a bid and bringing any ambiguities, discrepancies and/or inconsistencies to the attention of the public contracting entity prior to submitting a bid.  The failure to do so can have an adverse impact on any contractor claims relating to or arising from the claimed ambiguity, inconsistency and/or discrepancy.  Here, Juliano had sought payment of $631,895.27 for extra work, which is approximately 25% over and above its $2,518,030.75 contract amount. 

The Aspen Case is particularly harsh on the general contractor as the Court found a patent ambiguity despite the fact that none of the three bidders, including Juliano, identified the ambiguity prior to submitting their bids.  The failure of the other two bidders to also raise the so-called patent ambiguity did not impact the Appellate Division’s decision denying Juliano’s claim.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

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