Bankers Surety Co. v. Watts

Hart, J., (after -stating the facts). By the terms of the contract ‘the building was to be -completed September 1, 1910. As a matter of fact, it was not completed until some time in February, 1911. No notice of the failure of the contractor to complete the building within the designated time was given by the owner to the -surety within ten days as required by the contract. The defense of the surety company rests mainly up-on this failure to give notice. It is not claimed that the surety in fact -assented to the extension of time, but it is -claimed that it will be deemed to have assented thereto by the terms o-f the contract itself Which, it is said, contemplates that additional time for the completion of the building might be granted. Counsel bases this -contention on that clause of the contract which provides for the completion of the building by the first day of September, 1910, under penalty for delay of ten dollars per day. They contend that the contract ‘definitely contemplated that it might be necessary to extend the time -and that the -surety company must be held to have contemplated it also. In support of their contention they cite Graham and the Title Guaranty & Surety Co. v. United States, 231 U. S. 474, and United States v. McMullen and Other Administrators, 222 U. S. 460. We do not think either of these oases sustain the position assumed by counsel. The contract in the McMullen case provided that no extension of time wais to be granted except upon the authority -of the Secretary o-f the Navy in -accordance with the terms of the contract; land the secretary granted an -extension. In the Graham case the bond in terms contemplated -an extension of time and the contract provided for a waiver of the time limit. Here the facts .are essentially different. There was ■no provision in the contract which contemplated an extension of the time. If the payment of ten dollars per day as provided in the contract for each day of delay be construed as a .penalty, as was done in the case of Wait v. Stanton, 104 Ark. 9, it is unenforceable and has no binding force whatever; on the other hand, if it be construed as liquidated damages it simply has the effect of the parties contracting in advance what the damages for a breach ■of the contract shall :be. It does not have the effect of providing for .an extension of tóme. It only fixed the measure of damages in the event the contractor committed a breach of the contract and was not justified in so doing. When the contractor failed to complete the building by the first of September, 1910, he committed a breach of the contract; and, under the express terms of the contract, in order to hold the surety company liable it was the duty of the owner to give written notice within ten days thereafter. The object of giving this notice, <ais shown by the contract itself, was to enable the surety company, seasonably, to take such practical action as might minimize its loss by reason of the contractor’s default. We are of the opinion that the contractor committed a breach of the contract when he failed to complete the building on the first day of September, 1910, and that this ■failure constituted a default within the meaning of that word as used in the contract. It was, therefore, the duty pf the owner of the building to notify the surety company of this default if he wished to. hold the surety company liable for the breach of the contract. This the owner failed to do. There is no testimony in 'the record tending to show that the surety .company waived the giving of this notice to it; neither is there anything in the record to show that the surety company assented to the extension of the time for the completion of the building or that the failure of the contractor to finish the work on time was justified or excused ‘by the conduct of the owner. It follows that the decree will he'reversed and the canse remanded with directions to the chancellor to dismiss the complaint for want of equity.