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Appeals court rules against Menomonee Falls subcontractor in breach of contract claim

By: Michaela Paukner, [email protected]//April 22, 2020//

Appeals court rules against Menomonee Falls subcontractor in breach of contract claim

By: Michaela Paukner, [email protected]//April 22, 2020//

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A Menomonee Falls subcontractor is finding no relief in the Seventh Circuit Court of Appeals in a lawsuit alleging breach of contract. The company was deemed to have done nothing wrong when it decided not to use Skyrise Construction Group as a subcontractor for a housing project near UW Oshkosh.

Skyrise sued Annex Construction, headquartered in Indianapolis, for breach of contract, promissory estoppel, misrepresentation and violations of deceptive-trade-practices acts in Wisconsin and Illinois. The companies had been in talks over framing and stick building for the housing project.

In July 2017, Skyrise bid $950,000 for rough-framing carpentry labor and stick building on Annex’s project. After receiving the bid, the president of Annex sent Skyrise a letter of intent. The letter said Annex was going to enter into a contract with Skyrise for the project’s rough carpentry work and that Annex would send Skyrise contract documents.

Upon receiving the letter, Skyrise blocked out the project on its calendar and declined other work for the time when the work was expected to be ongoing.

On Aug. 2, Annex emailed a contract to Skyrise. Court documents said Skyrise delayed signing and returning the proposed contract, so Annex sent the document again in September.

Skyrise’s project manager said the company needed more time to sign the contract and asked Annex to sign Skyrise’s proposal from July in the meantime. Annex did so, but Skyrise still did not sign the Annex contract.
Teams from the two companies met on the construction site on Oct. 9, and Skyrise learned the project wasn’t ready for framing. The teams started to discuss the possibility of giving Skyrise more responsibility to get the project done on time.

A few days later, Skyrise returned the contract signed with handwritten edits to its payment terms and scope-of-work statement. Skyrise later said Annex representatives had agreed to the changes orally. Annex never signed the revised version of the contract.

The companies continued to discuss increasing Skyrise’s responsibilities. On Oct. 31, Skyrise submitted a nearly $3.9 million proposal seeking a contract for framing, siding, windows and drywall.

Two days later, the Annex president emailed Skyrise saying, “We are going to go ahead and pass on this guys.” He said Annex had decided to bring in a large framing company that could meet the schedule at a lower cost.
Annex’s general counsel then emailed a letter formally rejecting Skyrise’s proposal from Oct. 31 and notifying Skyrise that Annex was not accepting and countersigning the previous contract.

Skyrise filed a diversity suit, seeking damages for breach of contract, among other things. The district court granted judgment in favor of Annex on all counts and denied Skyrise’s motion for summary judgment. Skyrise then appealed.

The Seventh Circuit Court of Appeals assessed each claim anew, but the judges on Tuesday came to the same conclusion as the lower court — affirming judgment in favor of Annex on all counts.

Skyrise had argued the contract was formed when Annex signed the bid in September, or when Skyrise signed and returned the contract in October. The court disagreed, finding neither held up as a contract under Wisconsin law.

“(Skyrise managing member) Garcia’s material alteration to the Proposed Contract operated as a rejection of the agreement and a counteroffer,” the opinion said. “Because Annex never accepted the counteroffer, no contract was formed.”

Skyrise also argued that if a contract didn’t exist, it was entitled to damages under the doctrine of promissory estoppel, which stops someone from going back on a promise even if there isn’t a contract.

The Seventh Circuit said Annex did express interest with its letter of intent, but the company also placed “significant conditions” on its interest — namely, the 20 pages of fine print in its proposed contract.

“(T)he undisputed, objective evidence demonstrates that both parties intended for their relationship to be governed by a detailed contract that remained under review by Skyrise for two months before Skyrise ultimately rejected that contract by marking it with material alterations,” the opinion said.

As for the claims alleging misrepresentation and deceptive trade practices, the Seventh Circuit agreed with the lower court’s ruling, finding Annex had told Skyrise that it had the framing subcontract.

“There is some irony in Skyrise’s claim that it was falsely led to believe that it had a firm deal when Skyrise itself held onto the Proposed Contract for two months,” the opinion said.


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