North Dakota Contractor Wins Appeal in Street Paving Case

Mariner Construction, Inc. agreed to undertake road work forthe city of Bismarck, North Dakota. Within five months of Mariner’s completion ofthe work, the seal coating on the asphalt of the city’s streets began todeteriorate. Mariner blames its supplierfor defective asphalt; the supplier blames Mariner for defective application ofthe asphalt. In either event, the contractbetween Mariner and Bismarck provided for a one-year warranty against defectsin materials and workmanship:

WARRANTY. The Contractor shall guarantee all workagainst faulty materials and workmanship for a period of one year from the dateof final payment and the performance bond shall remain in full force and effectfor the period.

Bismarck claims that Mariner did not repair the pavement within this time frame. A jury agreed and awarded the city of Bismarck over $250,000 indamages, plus interest. The trial courtrejected Mariner’s request for a new trial. However, this week, the North Dakota Supreme Court reversed and granted Mariner a new trial. Thecourt unanimously held that the trial court erred in allowing the jury tointerpret the parties’ contract. The court reasoned:

Although the district court held in a pre-trial ruling that the contract was”not ambiguous” and precluded the admission of evidence during trialabout the parties’ intent, the court’s instructions effectively authorized thejury to interpret the contract. Our law for interpreting contracts requires thecourt to initially determine if the contract is ambiguous, which is a questionof law…. In a breach of contract action, if the contract is unambiguous, thecourt interprets the meaning of the contract as a matter of law and the trierof fact determines if the contract, as construed by the court, has beenbreached…. If a contract is ambiguous, the trier of fact may consider extrinsicevidence about the parties’ intent to determine the meaning of the contract….After that preliminary step in which the trier of fact determines the meaningof the contract, the trier of fact then decides whether the parties havebreached the contract….

Here, the district court did not follow that procedure; rather, the courtheld the contract was “not ambiguous” and sustained objections toproffered testimony about the meaning of the contract. The court neverthelessinstructed the jury on rules for interpreting the contract and that the failureto perform all or any part of what was warranted or required in the contractwas a breach of contract without instructing the jury what the contractrequired. Moreover, the special verdict only asked whether Mariner breached thecontract without any specificity about faulty workmanship or materials. Weconclude the court’s instructions did not fairly and adequately advise the juryon the applicable law for a breach of contract claim. We therefore conclude thecourt misapplied the law for resolving Bismarck’sbreach of contract claim against Mariner and abused its discretion in denyingMariner’s motion for a new trial.

City of Bismarckv. Mariner Construction, Inc., 2006 ND 108 (May 16, 2006).

[Meredith R. Miller]