12 Oct Lessons from a Liftboat Agreement
Semco, LLC v. The Grand, LTD. is nominally about a $15 million liftboat construction contract and the legal issues one would expect after a long trial and a big verdict. This post is more about how to administer and perform a contract, especially one with a friend:
- Be Ronald Reagan: Trust but verify vague assurances.
- Contract formalities have a purpose. Adhere to them.
- “You snuck in that contract revision” = “I didn’t bother to read it”.
- Didn’t warn of increased costs in writing? Why not?
- “Money and friends are like oil and water.” Michael Corleone, Godfather Part III.
- A disgruntled ex-employee is never good for your case.
- Failure to sign an agreement to clarify increased costs = worse things to come.
Semco, formed by Powers, was to construct a liftboat for The Grand, formed by Springbob, for $15.9 million. Springbob and Powers had been friends and business associates for 35 years.
The vessel’s design was initially simple but evolved during construction to the point that it was anything but “plain”. For example, interior bulkheads would be aluminum and not steel, tonnage was reduced to below 200, and the crane’s lifting capacity was increased, all at significant additional cost.
Only Springbob and Powers could modify or change the contract terms; change orders had to be approved in writing. If The Grand failed to respond to a requested change order it would be deemed rejected and the work would not be performed.
It was a swearing contest featuring the principals, their offspring, spouses of offspring, and experts.
Powers said that when increased costs were noted, Springbob told him to keep building the boat and not cut corners, and assured him that The Grand “would not hurt him or Semco”. Springbob denied that Powers informed him of increased costs. He said he told Powers that Semco alone would be responsible for the increased costs. What he meant by “helping” was to pay outstanding invoices and prior approved change orders.
At some point, the parties “got away from the change order program” and informal requests were approved by email or orally.
Springbob accused Powers of fraud by obtaining an artificially high valuation to convince Springbob to walk away from the vessel so Powers could sell it to someone else.
The Grand alleged that Semco “snuck in” an amended tonnage provision, to which The Grand never objected.
The Grand instructed Semco to use revised load charts to increase the crane’s lift capacity but never informed The Grand that they would pay additional money for it. A Semco witness said there was no way that Springbob, an experienced vessel and shipyard owner, would not have known that modification of the supporting structure would mean additional cost.
An ex-employee of The Grand testified that Springbob’s daughter, who testified, often misrepresented the truth and that is why he quit.
Semco’s lawyer drafted a document to memorialize an agreement about additional costs that was never signed by The Grand.