Massachusetts SJC Clarifies “Strict Compliance” Standard in Construction Contracts

In Massachusetts, it is well established that a contractor cannot recover damages from a construction contract without first showing that the contractor completely and strictly performed on all of the contract’s terms. Recently, the Massachusetts Supreme Judicial Court narrowed the rule by concluding that complete and strict performance is only required for contract terms relating to the design and construction itself. The high Court explained that non-design / non-construction contract terms are governing by “ordinary contract principles, including the traditional Massachusetts materiality rule.”¹

In the case – G4S Tech. LLC v. Mass. Tech. Park Corp. – G4S Tech. LLC (“G4S”) brought suit against Mass. Tech. Park Corp. (“MTPC”) alleging MTPC owed G4S $4 million of a $45 million contract after G4S completed the build of a fiber optic network in western and north central Massachusetts.² MTPC maintained that they withheld the $4 million because of substantial delays in the project.³ MTPC in turn brought counterclaims against MTPC alleging fraud and violations of the Massachusetts Consumer Rights Act. Specifically, MTPC maintains that G4S fraudulently and intentionally delayed payments to subcontractors in violation of the construction contract.⁴ The SJC held that the contract provisions dealing with the “timing of payments to subcontractors and the documentation concerning those payments” is not a contractual term relating to the design or the construction of the fiber optic cable itself.⁵ Thus, the SJC analyzed the alleged violations under the Massachusetts materiality standard as opposed to the strict and complete performance standard.⁶ In general, a material contract breach (i.e., a breach concerning an essential and inducing feature of the contract) may discharge the non-breaching party from performing on the contract while a minor or ancillary non-material breach generally does not discharge the non-breaching party (but may warrant monetary damages). Here, the SJC decided that the fraudulent recording of subcontractor payment did constitute a material contract breach.

The SJC’s holding in G4S Tech. LLC v. Mass. Tech. Park Corp. is significant for future construction contracts because it shapes different standards and effects for different categories of contractual terms. That is, to the extent a contractual term relates to the design or construction itself, a contractor is required to strictly and completely comply with such terms. The Court reasoned that strict compliance is required to ensure that the “construction itself is done safely and correctly according to design specifications.”⁷ However, if a contractor fails to strictly comply with a non-design / non-construction term then a court must analyze whether the non-compliance constitutes a material breach or merely a non-material breach and the effect thereof.

Moving forward, Massachusetts contract drafters, contractors, and owners should pay close attention to terms relating directly to the design or construction of a particular project. Interestingly, the SJC chose not to consider the consequences of contract provisions “that are subsidiary to or supportive of the design and construction, but do not directly involve the design and construction itself.”⁸ As such, future litigants may attempt to argue that particular provisions are merely “supportive” to a project’s design and construction and thus doesn’t require strict compliance. That being said, best practices for contractors remains the same – strictly and fully comply with all terms.
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¹ G4S Tech. LLC v. Mass. Tech. Park Corp., 479 Mass. 721, 723 (2018).
² G4S Tech, LLC, 479 Mass at. 721.
³ Id.
⁴ Id. at 723.
⁵ Id. at 733.
⁶ Id. at 734-24.
⁷ Id. at 731.
⁸ Id. at 732.