North Dakota Contractor Wins Appeal in Street Paving Case

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

WARRANTY. The Contractor shall guarantee all work against faulty materials and workmanship for a period of one year from the date of final payment and the performance bond shall remain in full force and effect for 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 in damages, plus interest. The trial court rejected Mariner’s request for a new trial. However, this week, the North Dakota Supreme Court reversed and granted Mariner a new trial. The court unanimously held that the trial court erred in allowing the jury to interpret 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 trial about the parties' intent, the court's instructions effectively authorized the jury to interpret the contract. Our law for interpreting contracts requires the court to initially determine if the contract is ambiguous, which is a question of law…. In a breach of contract action, if the contract is unambiguous, the court interprets the meaning of the contract as a matter of law and the trier of fact determines if the contract, as construed by the court, has been breached…. If a contract is ambiguous, the trier of fact may consider extrinsic evidence about the parties' intent to determine the meaning of the contract…. After that preliminary step in which the trier of fact determines the meaning of the contract, the trier of fact then decides whether the parties have breached the contract….

Here, the district court did not follow that procedure; rather, the court held the contract was "not ambiguous" and sustained objections to proffered testimony about the meaning of the contract. The court nevertheless instructed the jury on rules for interpreting the contract and that the failure to perform all or any part of what was warranted or required in the contract was a breach of contract without instructing the jury what the contract required. Moreover, the special verdict only asked whether Mariner breached the contract without any specificity about faulty workmanship or materials. We conclude the court's instructions did not fairly and adequately advise the jury on the applicable law for a breach of contract claim. We therefore conclude the court misapplied the law for resolving Bismarck's breach of contract claim against Mariner and abused its discretion in denying Mariner's motion for a new trial.

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

[Meredith R. Miller]