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ABLE DEMOLITION v. City of PONTIAC - A Clear Mistake

Able Demolition (Able) entered into a contractual arrangement with the city of Detroit in 2004 to demolish abandoned residences within the city. As a condition of the agreement, Able was to obtain a “Letter to Proceed” from the city law office prior to engaging in the services it was contracted to perform (ABLE DEMOLITION v City of PONTIAC, 2007). After execution of the agreement, Able demolished 11 residences without obtaining a “Letter to Proceed” as required in the agreement. Subsequently the city of Pontiac, refused to tender payment to Able and Able sued for non-payment of the work performed. When brought to the courts they both ruled in favor of the city of Pontiac. For the purposes of this blog we are going to look at this case in a few ways. First, when all of the facts are considered, was the result fair? Next, what may have transpired to cause Able to make such an egregious mistake. Last, and likely tied to the middle response, was Able unaware of what was required of them?

To answer the question as to whether or not the ruling was fair, one must first determine what fair means in this case. If one were to poll either side of the debate the answer to whether or not the ruling was fair would surely differ between the city and Able. Able would likely find the ruling unfair due to the fact that they had costs and manpower wrapped up in the work that was completed yet received no compensation for said work. The city would likely find the ruling very fair as the contract specifically and unambiguously indicated that conditions needed to be met before work would commence. The word ambiguity in this instance is important and as indicated in an article that appeared in Forbes magazine in 2019, words matter. Some examples of how unclear language would be Andy Warhol’s estate losing $7 million dollars because of a poorly worded clause, and the owner of the Los Angeles Dodgers losing the team in 2010 because of improper wording (Garson, J., 2019). By not completing this condition, Able was not authorized to perform the work and thus the city would feel that they are within their contractual rights to withhold payment. In my opinion the question of “fairness” in the ruling really comes down to what the intent of the agreement was from both sides and what actually occurred. From the perspective of the city, as indicated in the summary of the case, the requirement of the “Letter to Proceed” was required so that the city was not exposed to liabilities stemming from tearing down properties unlawfully (ABLE DEMOLITION v City of PONTIAC, 2007). From a legal standpoint I believe the rulings were “fair” in both cases. Agreements are written for a reason. When language is included in the agreement that is clear and unambiguous, with a valid intent, then the company that breaches the language should be held to the letter of the agreement or have to give restitution. In this case, the agreement’s penalty for breach was clearly stated as non-payment. My opinion is that the only this clause would not have been applicable is if it were purposefully inserted as a means to catch the contractor not complying so that the city did not have to pay. Even so, recent court cases have found that misrepresentations or fraud represented orally are not enough to render an agreement void (Mazero, J., 2019). If this were the case in this instance it would appear unfair. This is not the case here and when the need for the “Letter to Proceed” is explained, the fact that Able did not perform as the contract specified put the city at risk of potentially infringing upon the property rights of its citizens. Because of the importance of this provision to the city, and the fact that Able knowingly violated the provision, it is my opinion that the ruling was fair. The language requiring the “Letter to proceed” was very clear and explained what would happen in the instance that the contractor failed to fulfill its obligation. If Able had objections to the provision, it should have been negotiated before agreeing to the language.

The next question as to how Able managed to mess this up so bad and cost themselves this much money may be found in an article written in the Detroit Free Press in 2018. The article details how the bank hired by the city to pay demolition contractors has a payment backlog of approximately $8.7 million dollars (Stafford, K., 2018). The process to receive payment is described as containing a voluminous amount of paperwork and being very arduous. The article also details how the bank would at times pay contractors prior to receiving the authority to do so (Stafford, K., 2018). This information may or may not give some insight as to what happened on the part of the contractor in this situation. It is entirely possible that Able was a newcomer to conducting work for the city of Pontiac in the residential sector. In fact, the program to start tearing down houses in Detroit only began in 2004 (Mead, H., 2010), so it is entirely possible that Pontiac’s demolition program began around the same time. Anyone who has ever worked with a municipality or a government entity understands that their agreements can be wordy, confusing, and contain language that is never applied or enforced. From my perspective, it is very likely that Able either missed the provision in the agreement, didn’t read the language, and/or didn’t feel that it would actually apply. As this was the start of a new program and they did not have any history upon which to rely, Able would not know which provisions of the agreement would or would not apply. The fact that paying demolition contractors before the proper paperwork is vetted still occurred in 2018 indicates that this would not be an unreasonable assumption. Another scenario as to why Able moved forward without the letter can be found in subsequent appeals. In another appeal, Able gives reason to believe that they may have been instructed or given approval to proceed by Pontiac city officials (ABLE DEMOLITION v City of PONTIAC, 2007). While the appeal was denied, it gives a likely reason as to how or why this happened.

Ultimately it appears that Able Demolition was instructed by a city of Pontiac official to move forward with the project. While this was not found to be a valid legal argument, it goes a long way in explaining how this could happen, and how an organization that doesn’t understand or follow the language in a well written and clear agreement can put themselves at unnecessary risk. If Able had understood the ramifications of breaching the agreement and understood that they were not going to get paid, it is extremely unlikely that they would have proceeded with the work.