Written by Kristina Kamler

In Dietzel Enterprises, Inc. v. J. A. Wever Constr. Inc., the Nebraska Supreme Court confirmed that a contractor was able to recover damages from a subcontractor (an excavator) that materially breached the contract by leaving the excavation project after encountering unanticipated rock conditions, which made completion of the excavation project more difficult than anticipated. The trial court awarded the contractor more than $2.7 million dollars in damages. On appeal, the Nebraska Supreme Court declined to find that the excavator justifiably relied upon an alleged misrepresentation from the contractor regarding soil and other conditions contained in email correspondences, particularly where the contractor provided the subcontractor with a detailed geotechnical report of the soil conditions before the subcontractor remitted his bid for the project. Because the excavator did not justifiably rely upon the alleged misrepresentations, the subcontractor was not excused from breaching the contract under a misrepresentation theory when he walked away from the excavation project because it became too costly and difficult to complete.

In the same respect, the Nebraska Supreme Court held a significant portion of damages awarded by the trial court for lost revenues were not supported by the evidence. Mainly, the contractor offered evidence of lost gross revenues without providing evidence of expenses the contractor would have incurred to complete the work for which it would have received the lost revenue. This would have made the contractor more than whole – granting him the revenues of the project without accounting for its expenses. Because of this defect, the jury should not have been provided with evidence of the contractor’s lost revenues. Correspondingly, the Nebraska Supreme Court reduced the contractor’s award by more than $1 million dollars.

So, who wins on a construction project gone wrong? The one who is not the first to materially breach the contract prevails. But, no one walks away with a windfall.