United States Court of Appeals, District of Columbia Circuit
United States Court of Appeals, District of Columbia Circuit
United States Court of Appeals, District of Columbia Circuit
2d 764
primer paint. However, on December 20, 1965 he ordered that Basic bear this
cost on the ground that it was its responsibility under its contract to remove
foreign substances from the ceilings before painting. Basic disputed this
liability and appealed to the Fund under a Disputes Clause in the prime
contract; meanwhile on December 22nd it ordered Johnson to proceed with the
application of the additional paint in accordance with the architect's directive.2
The architect's directive stated the work was "in lieu of, not in addition to,
original contract requirements" and that "No extra to contract will be approved
by this office, for this work." Johnson denied any responsibility for the failure,
on request submitted an estimate as to the cost of the extra painting, requested a
change order or other definite assurance of payment it claimed it was entitled to
under its contract, and started the painting under protest without relinquishing
its right to compensation. Basic did agree to advance Johnson $1,500 a month
to assist the latter to meet some of the cost of the additional painting. However,
Basic expressly conditioned its advances with the reservation that same did not
constitute an acknowledgment of liability to Johnson for the disputed painting
work.
3
The Fund then on January 10, 1966 rendered its decision upon the appeal by
Basic. It determined that the stearic acid had been used with the architect's
knowledge and approval, that the removal of the stearic acid by means of
"exotic" cleaning compounds was not anticipated under its contract with Basic,3
and that the Fund would therefore bear the cost of the additional coat of primer.
However, apparently as a compromise with Basic, the Fund held that Basic was
responsible for removing the defective coat of paint on the ground that it
should have tested the adhesiveness of the paint before commencing the
painting operations. Although Basic denied this liability, it nevertheless agreed
to continue work and to resolve the matter at a later date.4
Another element was then injected into this unstable situation. Painting had
been stopped, first for strikes in July and August, and secondly since early
October while the cause of the peeling was being determined, and the Fund
thereafter became increasingly upset over the slow progress being made in the
painting due to the fact that Johnson was not employing what the Fund
considered to be an adequate number of painters to meet completion deadlines.
The Fund put pressure on Basic to speed up the work and Basic in turn warned
Johnson that more painters would be needed to meet the approaching
completion deadlines. During this time Johnson was complaining that he had
not received the change orders required by his subcontract before he could be
assured of payment for the extra work, that he had not been absolved of
responsibility for the cost of removing the ceiling paint in the Biology Building
and that to accelerate the work by adding the additional workmen being
required by the Fund would decrease their efficiency and substantially increase
his cost, for which he should also receive some assurance that he would be
compensated. A temporary working arrangement was reached between Johnson
and Basic to gradually build up the painting crews, but apparently this was not
enough to satisfy the architect, Edward Stone, who recommended to the Fund
that Johnson's contract be cancelled. The Fund agreed, and on February 9,
1966, the architect Stone wrote Basic directing it to cancel its subcontract with
Johnson and advising that no extension of time would be granted for this
cancellation.5
6
Basic, however, was reluctant to discharge Johnson. Basic did notify Johnson
by telephone of the February 9th directive it had received to cancel his contract
but recommended that Johnson come in to discuss the matter. This Johnson
refused to do, and the next day informed Basic that unless it received an
assurance of payment for the extra work, it would quit the job.
Johnson's problem was largely one of financing the additional work that was
being demanded of him on an accelerated basis. This was aggravated by the
fact that he had not been paid for some past expenditures he claimed were due
him. The assurances Johnson demanded were not forthcoming, and Johnson on
February 17, 1966 pulled his men off the job.
Upon the above facts Johnson brought suit against Basic and Stone for damages
resulting from breach of contract alleging that Basic refused to issue change
orders and make payments in accordance with the contract and wrongfully
terminated Johnson's subcontract in order to conform to Stone's wrongful
direction and thereby made it impossible for Johnson to perform his
subcontract. The court below held for Johnson against Basic and entered
damages in the amount of $66,399.68 in payment for work done by Johnson
before it abandoned the job, and for $5,367.57 in payment for certain material
left at the job site by Johnson which was seized by Basic after Johnson
abandoned work and Basic's counterclaim for damages for breach was also
denied. John W. Johnson, Inc. v. Basic Construction Co., 292 F.Supp. 300
(D.D.C.1968). Basic is here appealing this decision. On Johnson's suit against
the architect, Stone, for cancelling its subcontract, the trial court held for the
architect on the ground that Johnson had abandoned the work because it had not
received assurance of payment rather than because of the architect's
cancellation of its subcontract. Johnson is here appealing this decision. We
affirm both decisions below, and turn first to Johnson's suit against Basic.
10
11
Whether Basic was required to give Johnson a commitment for payment for the
extra painting when it had received none from the Fund and when it had
received no definite statement from Johnson of the amount claimed?
12
The subcontract contained two references to Extra Work. The first was a
sentence at the bottom of Exhibit "A" to the subcontract stating:
13
14
This article of the Specifications reserved in the Fund the right to modify or
change the contract between the Fund and Basic "by supplement thereto
providing for extra work in order to carry out and complete more fully and
accurately the work called for herein." The Article further provided that if the
changes "increased the work * * * the contract consideration shall be
increased * * * *" and the completion date extended as the Fund may
determine; that unless the parties agreed on the amount of the increase or a unit
price was contained in the contractor's proposal, the amount of the increase
shall be calculated and determined by the Fund according to (1) the fair and
reasonable cost generally plus profit, or (2) the actual cost, provided the Fund
gives the contractor notice that it intends to exercise this option before the extra
work commences. Basic gave no such notice. The last sentence in the Article
provided, "Nothing in this article shall excuse the contractor from proceeding
with the extra work as directed."8
15
16
The Contractor may at any time during the progress of the work and without
notice to any surety require any alteration, deviation, addition or omission from
the work contemplated by this contract; in the event of either case the increase
or decrease of cost occasioned thereby shall be estimated according to the price
fixed by this contract for the whole work, and allowance shall be made on the
one side or the other as the case may be; where Owner is the Government,[9 ]
adjustments and allowances for changes in the work provided herein shall be
made in confirmity with the method established by the Government; but no
such change shall be made, nor shall demand be made on the Contractor on
account of any such change, unless the same be ordered in writing signed by
the Contractor.
17
18
We consider the interpretation Basic gave to its own contract with the Fund in a
letter it wrote the Architect.10 with respect to an order to perform the extra work
20
Further, we cannot proceed with the work without a commitment from you that
we will be reimbursed for additional costs due to application of the special
primer sealer, application of the additional coat of paint, and removal of the
peeling paint. (Emphasis added.)
21
22
Johnson was accordingly fully within its rights when it wrote Basic on January
3, 1966 with respect to its own extra work situation stating:
23
You have been unwilling in accordance with the paragraph referring to changes
on the bottom of page 2 of our subcontract[13] and you apparently expect us to
do the work which is required to resolve your dispute with the owner, or
architect without being compensated therefore [sic].
24
We are not finiancially [sic] able to bear that burden even if we were inclined to
do so and insistence on your part, if complied with, would put us out of
26
This brings us to consider whether the fact that Basic had not received a
commitment from the Fund operated in any way to relieve Basic of its
obligation to furnish Johnson with a "supplement" to the contract or with a
written order stating that the work being required was an "addition" from the
work originally contemplated by the contract and making "allowance" for the
increased cost or providing that the "contract consideration shall be increased."
Basic contends that it was relieved of the obligation of furnishing such
commitment under the circumstances because the subcontract fully integrated
the terms and conditions of the prime contract and thus operated to bind
Johnson to the same terms, including the Disputes Clause16 of the prime
contract. We do not so construe either the prime contract or the subcontract for
two reasons.17 First, because Basic never satisfied the requirement of Article X
that there be a "supplement" to the contract providing that the contract
consideration be increased. Second, because even if the prime contract were
fully incorporated into the subcontract, its general provisions would not
overcome the specific provision of the subcontract dealing with "Changes"
which required Basic to give a written order for the work which made
"allowance" for the increased cost.18 Furthermore, the prime contract was only
incorporated for the limited purpose of requiring compliance with the terms
and provisions of the prime contract insofar as same were applicable to the
work to be performed and did not extend to require adherence by the
subcontractors to administrative remedies and decisions thereunder by the
parties to the prime contract.19
27
28
29
This binds the subcontractor to the terms and provisions applicable "to the
work," and we construe this to mean to the character and manner of the work to
be done by the subcontractor. Guerini Stone Co. v. P. J. Carlin Construction
Co., 240 U.S. 264, 277, 36 S.Ct. 300, 60 L.Ed. 636 (1916). Also, the
subcontractor was not a party to the prime contract and he was not made privy
to its provisions by having it incorporated by reference into its subcontract. In
fact, the prime contract specifically provided that none of its provisions shall be
construed as creating any contractual relation between the Fund and any
subcontractor. (General Conditions, 17, Subcontractors.) Under such
circumstances we have no difficulty in concluding that the fact that the prime
contract was incorporated by reference into the subcontract did not justify an
interpretation that would excuse Basic from the requirement of issuing a change
order committing itself to pay for the extra work or require that Johnson be
bound to Basic's position in any dispute vis-a-vis the Fund.
30
We will deal further with the interrelation of the two contracts in Part II
wherein we discuss the Disputes Clause, but now we consider a subsidiary
argument of appellant's first issue, i. e., the claim that somehow Basic had not
received a definite statement from Johnson of the amount claimed for the extra
work and that somehow this excused Basic's refusal to issue the commitment to
pay for the extra work. In this respect we find that Johnson did comply with the
requirements of the subcontract.
31
When Basic on December 15, 1965 first wrote Johnson enclosing a copy of the
Architect's letter directing extra work it requested an estimate. Johnson replied
the very next day and estimated a cost for ceilings only of $38,240 which he
said would be increased in buildings where the painting followed trim and
cabinets. On January 4, 1966, Johnson withdrew its estimate saying the actual
cost was exceeding the estimate. All of this may have been premature because
the final directions for the extra painting were not given to Johnson until
January 14, 1966. If the Disputes Clause of the prime contract was applicable
to Johnson (as Basic contends), it was required:
32
Within thirty (30) calendar days after such extra work was required to be
performed * * * the contractor must submit to the Fund a verified detailed
statement * * * of the items of extra work or of the details and amounts of any
Johnson complied with this requirement within the 30-day period by submitting
the required information in a letter to Basic dated February 14, 1966.20 So there
is nothing to appellant's point in this respect.
34
These estimates were all that was required of Johnson and there was ample time
after they were received by Basic for it to issue its change order, but instead it
refused to act on the first estimate and rejected the second estimate out of hand
and at all times refused to issue any commitment to Johnson to compensate for
the "addition" of extra or increased work. Actually, it seems quite clear on this
point that Basic is now trying to hide behind the claim that initially it needed a
specific quotation from Johnson. This is not correct. Basic could have issued
the change order for a fixed price or they could have directed the work and
established or negotiated the method of computing the price. Had Basic really
been withholding the change order because they were waiting for a specific
figure from Johnson, they could have issued it immediately after they received
Johnson's $38,240 estimate on December 16th, or if they did not consider that
sufficiently definite, they could have negotiated further at that time. Or they
could have directed the work on the January 14th estimates or in accordance
with Article X could have given notice that they would pay the "cost" thereof
or made definite counter offers on the price. That they followed none of these
alternatives plainly indicates that they did not intend to issue any commitment,
and they still contend they were not required to do so. We will discuss in Part II
whether this position was justified by the Disputes Clause.
35
But before doing so we deal with Basic's contention that Johnson broke its
contract when it abandoned the job eight weeks following the original breach
by Basic after having accepted in the meantime certain advances and payments.
We find that this point is not available to Basic as the parties had agreed at the
time of the subsequent agreement that same would not constitute a waiver of
their contract position or a relinquishment of any rights or claims against the
other.
II
36
37
38
To a certain extent this involves many of the aspects of the issue discussed in
Part I but is directed more specifically to the Disputes Clause which provides:
A. If the Contractor claims * * * that any work he has been ordered to do shall
be considered extra work * * * he must within five (5) calendar days after being
ordered to perform the work claimed by him to be extra work and before
proceeding to execute such work * * * file a written statement with the Fund of
the basis of his claim and request a determination thereof.
40
41
C. The Fund shall notify the Contractor in writing of its determination of the
validity of his claims. If the Contractor disagrees with such determination of the
Fund he must, in order to reserve his rights based upon his said claims, within
five (5) calendar days after receiving notice of the Fund's determination, file a
written statement with the Fund that he reserves his rights in connection with
such claims.
42
The critical question here is whether this clause was in any way applicable to
Johnson.
43
44
45
This incorporates the prime contract into the subcontract by reference, but we
have previously noted in discussing the extra work provisions, that this was for
the limited purpose of specifying "the work" to be performed. However, that
holding did not control our decision with respect to the contract requirements
for extra work because substantially the same result would have been reached
under either extra work provision since both were subject to an additional
written order or writing that was never furnished by Basic. So we consider the
Disputes Clause in a slightly different context from the extra work provision, i.
e., the Disputes Clause was not specifically incorporated by reference and it
relates to a procedural matter which is farther removed from "the work"
contemplated by the contracts.
46
The Disputes Clause basically provides the procedural means for the
determination of liability between the owner and prime contractor in case a
dispute arises. However, Johnson, as a subcontractor, is not a party to that
contract, even though it is incorporated by reference into his subcontract, he
had no rights thereunder, and there is no provision in the prime contract which
would allow a subcontractor to appear or participate in any way before the
Fund in a dispute which affected it. Indeed, the Fund,21 as any other owner,22
may not wish to deal with a subcontractor at all, and we do not criticize this
mode of doing business. However, since there is no clear contractual language
requiring Johnson to relinquish its right of abandonment in return for its
questionable right to recover its extra cost through the hazards of litigation, and
since the contract was drafted by Basic and ambiguities are to be construed
most strongly against it, and since the Disputes Clause by its terms relates to
administrative remedies between the owner and the prime contractor without
any reference to the subcontractor, we conclude that the Disputes Clause is not
applicable to disputes between Basic and Johnson.23
47
A similar result has been reached in other circuits. In United States for Use of
B's Co. v. Cleveland Electric Co., 373 F.2d 585, 588 (4th Cir.1967), the court
stated:
48
The basic error of the prime contractor in this appeal is his contention that the
subcontractor is bound in every way and exactly as the prime contractor is
bound by the terms of the prime contract. It is true that the terms of the
subcontract stated that the subcontractor was bound by the terms of the prime
contract and that it assumed the prime contractor's obligations to the
Government insofar as applicable to the work performed by the subcontractor,
but this identical language has been held, and we think properly, not to require
the subcontractor to pursue the administrative remedies given the prime
contractor in the disputes article. * * * We think that that agreement was
intended to cover the quality and manner of performance of the subcontractor,
not the rights and remedies between the prime contractor and the subcontractor.
Thus the obligation to pursue and to exhaust the administrative remedies
provided in the disputes article of the prime contract is the prime contractor's
obligation alone * * * *
49
See also Central Steel Erection Co. v. Will, 304 F.2d 548, 551 (9th Cir.1962);
Fanderlik-Locke Co. v. United States for Use of Morgan, 285 F.2d 939 (10th
Cir.1960), cert. denied, 365 U.S. 860, 81 S.Ct. 826, 5 L.Ed.2d 823 (1961).
Special provisions of a subcontract prevail over provisions of a general contract
incorporated by reference. Perry v. United States for Use of Newell, 146 F.2d
398, 400 (5th Cir.1945); Hill & Combs v. First Nat. Bank of San Angelo, 139
F.2d 740, 742 (5th Cir.1944).
50
The cases cited by Basic are not to the contrary. Several of these cases stand
only for the proposition that a subcontractor is bound by the plans and
specifications of the prime contract. See, e. g., Ehret Magnesia Mfg. Co. v.
Gothwaite, 80 U.S.App.D.C. 127, 149 F. 2d 829 (1945); Linde Dredging Co. v.
Southwest L. E. Myers Co., 67 F.2d 969 (5th Cir.1933). Other cases cited by
the appellee hold only that the architect's or engineer's decisions as to the
quality or quantity of the work done under the specifications of a contract are
binding on the subcontractor when there is a specific provision in the
subcontract to such effect See Clarke Baridon, Inc. v. Merritt-Chapman & Scott
Corp., 311 F. 2d 389, 395, 397 (4th Cir. 1962); Warner Construction Co. v.
Louis Hanssen's Sons, 20 F.2d 483, 489-490 (8th Cir. 1927) 24; Charles S. Wood
& Co. v. Alvord & Smith, 258 N.Y. 611, 180 N.E. 354 (1932), aff'g 232
App.Div. 603, 251 N.Y.S. 35 (1931); Sweet v. Morrison, 116 N.Y. 19, 22 N.E.
276 (1889). There is no such provision here and the decision by the Fund went
further and attempted to adjudicate legal rights and liabilities between itself and
Basic. Johnson could have bound itself to the outcome of this determination,
but our interpretation of the subcontract persuades us that it did not.25
51
III
52
As for Johnson's suit against the architect Stone, the court below found on
substantial evidence that Johnson did not abandon its contract because of the
architect's directive to Basic to discharge him, but rather because it had not
received assurance of payment from Basic. Thus the requisite legal clause
between the architect's directive and Johnson's abandonment of its subcontract
has not been proven.
53
54
Affirmed.
Notes:
1
Basic's field project manager directed Johnson to stop painting all the ceilings
some time in October to find out the cause of the peeling. (App. 21-22.)
A letter was sent by Basic to Johnson directing work but all this fell short of
being the commitment required by the Changes paragraph of the
subcontractSee page 769 et seq., infra. This was admitted by Basic's Executive
Vice President, H. P. Read, who testified Basic did issue an initial letter to
Johnson but this contemplated a following document which was the change
order and this final change order was never sent. (App. 69-70).
This was the procedure envisioned by the Disputes Clause of the prime
contract. See p. 774infra. The record does not show how the Fund finally ruled
in this matter.
The architect, as the Fund's agent, could not deal directly with Johnson but
rather had to deal with him through BasicSee note 21 infra.
The February 14, 1966 letter Johnson wrote Basic stated (1) that 23,853 man
hours were necessary to complete the eight buildings, (2) that the change in
painting specifications was not concluded until January 14, 1966, (3) that
Johnson had expanded its crew to 35 men, (4) that if Basic desired further
acceleration they would have to absolve Johnson from responsibility for the
cost of removing ceiling paint in the Biology Building and accept certain
invoices previously submitted totaling $12,513.73, (5) that Basic would have to
agree to pay "around $70,000" (possibly more) due to change in ceiling
painting specifications, and $14,438 (possibly more) for trim operation being
advanced due to ceiling holdup, (6) that Basic should accept responsibility for
painting and removing paint on metal partitions which should have come with
factory finish, and (7) other miscellaneous items. Johnson estimated that these
items would increase the sums due under the contract around $98,000 (possibly
more) and if the painting crew were increased to 60 men the acceleration would
reduce the efficiency by an additional $42,000. Johnson concluded by saying
he was "not in a position to continue paying the men during these negotiations
after February 15, 1966." Basic received this letter and on February 16, 1966
and at 9 A.M. told Johnson that his "demands * * * werecompletely
unacceptable to [Basic] * * * and that [Basic] * * * could not go along with
them." (Emphasis added.) Thereupon Johnson had his men pulled off the job.
7
This total of $140,000 for extra work is comparable to the $165,000 sought by
the counterclaim of Basic against Johnson
Government refers to the United States or to the State of New York as bodies
exercising sovereignty and not to subordinate divisions thereof. In re Stillman's
Estate, Sur., 53 N.Y.S.2d 718, 732 (1945). The State University Construction
Fund is a corporate governmental agency constituting a public benefit
corporation created within the University of New York. L.1962, c. 251 2et
seq. effective April 1, 1962. McKinney's Consolidated Laws of New York
Annotated Book 16, Education Law, 370 et seq. The University is a
continuation of a corporation created in 1784 under the name of The Regents of
the University of the State of New York. Thus the Fund is not "Government."
10
The Architect was the agent of the Fund in many contract matters
11
the actual cost of the extra work. What Basic could not do was to order the
extra work and contend that it had no obligation to pay therefor. To the extent
that these methods were in conflict, all ambiguities were created by Basic and
would be construed most strongly against it
12
13
14
15
Testimony of Basic's Vice President, Henry S. Read, proved that Basic never
issued a change order:
Q Now, did the Johnson Company make a demand upon Basic for a change
order on account of the requests of Basic to have Johnson Company apply that
third coat of paint?
A Oh, yes, sir.
Q Did Basic ever issue one?
A No, sir.
Read's testimony also was equivocal as to why Basic had not informed Johnson
that the Fund had agreed to pay for the third coat of paint:
Q Why did you not tell Mr. Johnson at the time that the Fund had agreed to pay
for the third coat, and why did you not render him a change order for that cost?
A Well, to answer that question in sequence, I think I did tell Mr. Johnson [the
Fund] had agreed in principal to pay him for the third coat. I didn't issue a
change order because we do not issue change orders to a sub-contractor on
work assigned by the owner until we receive their official change order.
THE COURT: Well, now, isn't there a provision in the contract that no payment
shall be made for extras except pursuant to change orders?
A Yes, sir.
THE COURT: And yet you expect Johnson to do extra work without a change
order? Is that so?
THE WITNESS: Yes, Sir.
*****
THE COURT: Well, you mean that the contractor and subcontractor should go
ahead and do the extra work on the chance that the change order will be issued
later?
THE WITNESS: Yes, sir, that was the obligation we undertook.
THE COURT: And if a change order was not issued later, what would happen?
THE WITNESS: Then if they didn't our only recourse would be an appeal or
inter-litigation against them.
THE COURT: In other words, you wanted the sub-contractor to take the risk of
the possibility of a change order not being issued? That is what this amounts to,
does it not?
THE WITNESS: Sir, we had some three-quarters of a million dollars of work
that we had to do under this fashion under this contract.
16
17
When the Fund held on January 10, 1966, that the contract did not require the
removal of the stearic acid residue that decision necessarily determined without
explicitly saying so, that "the fault lay in the requirement combining the use of
stearic acid with the type of paint specified" in the contract specifications
(Appellant's Reply Brief, p. 7). The fault was thus found to exist in the
Specifications for which Johnson was in no way responsible. It is hard to see
how, in view of such admissions, that Basic can contend there was any bona
fide dispute between Basic and Johnson over Basic being obligated to furnish a
supplement or change order agreeing to pay for the extra work
18
See p. 776infra.
This would be within 30 days of the date Johnson received the January 14,
1966 letter which was addressed to him at Washington, D.C. and would
presumably have been actually received by him on January 17th, a Monday,
and the first business day following the date of the letter
21
The Fund expressly avoided any contractual relationship with any subcontractor
in the prime contract: "No provision of this Contract shall, however, be
construed as creating any contractual relation between the Fund and any
subcontractor * * * *"
22
For example, the United States may similarly avoid a contractual relationship
with subcontractorsSee, e.g., United States v. Blair, 321 U.S. 730, 737. 64 S. Ct.
820, 88 L.Ed. 1039 (1944); United States for Use of B's Co. v. Cleveland
Electric Co., 373 F.2d 585, 588 (4th Cir. 1967); Fanderlik-Locke Co. v. United
States for Use of Morgan, 285 F.2d 939, 942 (10th Cir. 1960), cert. denied, 365
U.S. 860, 81 S.Ct. 826, 5 L.Ed.2d 823 (1961).
23
An additional reason for deciding that the Disputes Clause in the prime contract
was not applicable to the subcontractor may exist in that provision of the
subcontract providing "All general language or requirements contained in
thespecifications (including General Conditions or General Provisions) are
superseded by this agreement * * * *" It is clear from a number of references in
the testimony and documents that the Disputes Clause was one of the
requirements that the parties considered to be "contained in the specifications."
The reference in Exhibit A to the general contract calling attention to Article X
(Extra Work) describes it as being part "of the specifications." The architect in
his letter of February 9, 1966 to Basic directing cancellation of Johnson's
contract indicated he considered Article 17 of the General Conditions entitled
"Subcontractors" to be part of the Specifications (App. 182); Read, the
Executive Vice President for Basic, in testimony referred to the Disputes
Clause as being a requirement of the Specifications (App. 52); and Read also in
testimony referred to Article 17 (Subcontractors) as being in the Specifications
(App. 63). We note that the term "specification" is generally taken to be "the
particulars or details of the plan * * * *" 13 Am.Jur.2d Building and
Construction Contracts 12 n. 12 (1964). The parties, of course, are free to
define this term as they will, and we may not imply a different meaning in the
face of a clear indication of the meaning of the term in the contract itself. Were
there any doubts on this point, it would still be necessary to reach this result in
accordance with the rule that contracts are to be most strictly construed against
25
The decision was binding only as to "matters of fact" but not as to "legal rights
or liability."
Basic in its December 31, 1965 letter to Johnson admitted in effect that Johnson
was not bound by the outcome of Basic's dispute with the Fund when it
informed Johnson that it was appealing the architect's determination to the
Fund and then said:
[W]e further recognize and agree that whatever the result of this claim against
the Owner may be, it will in no way prejudice any rights you may have against
Basic under your subcontract agreement. (Emphasis added).