## Facts

- Mutual Life Insurance Company of New York hired Turner Construction Company under a cost-plus-fixed-fee arrangement to build a 20-story office building in New York City.
- Bethlehem Steel Company subcontracted with Turner to furnish, deliver, and erect the building’s structural steel at a base price of $182 per net ton.
- The subcontract contained an escalation clause adjusting the subcontract price for increases or decreases in “prices for component materials,” labor rates, and freight rates before completion, capped at $15 per ton.
- After the escalation clause’s effective date, Bethlehem imposed a uniform $10-per-ton increase on steel products (including shapes, plates, bars, sheets, rivets, and bolts) and applied the increase to steel supplied for the project.
- Turner and Mutual paid amounts billed other than the escalation portion but refused to pay the $10-per-ton adjustment, asserting that “prices for component materials” meant Bethlehem’s raw-material input costs (e.g., ore, scrap), not Bethlehem’s trade prices for finished steel products.
- Bethlehem maintained the clause referred to Bethlehem’s regularly charged prices for the steel items delivered to the job and billed escalation charges totaling $94,861.15.
- After nonpayment of the escalation portion, Bethlehem filed a mechanic’s lien against Mutual’s property and brought an action to foreclose the lien and recover the unpaid sums.

## Issues

1. Whether “prices for component materials” in the escalation clause referred to Bethlehem’s regular trade prices for the steel products delivered to the project or to Bethlehem’s raw-material input costs.
2. Whether the escalation clause was ambiguous, requiring a trial on the parties’ intent.
3. Whether tying the contract price to Bethlehem’s price increase rendered the clause illusory or lacking mutuality.
4. Whether Bethlehem was entitled to summary judgment and enforcement of its mechanic’s lien as a matter of law.

## Decision

- The Court of Appeals affirmed the order granting summary judgment to Bethlehem and directing an assessment of the amount due.
- The court held the escalation clause was unambiguous and, as a matter of law, “prices for component materials” referred to Bethlehem’s prices for the steel products used on the job, not Bethlehem’s internal raw-material costs.
- The court rejected the claim that the clause allowed arbitrary unilateral price-setting, noting the increase was a publicly quoted, uniform price increase applied to all purchasers and was subject to the $15-per-ton cap.
- Because the contract meaning was a question of law and the relevant facts were undisputed, summary judgment and lien enforcement were proper, with an assessment to determine the exact sum within the contractual cap.

## Legal Principles

- When contract language is unambiguous, intent is determined from the written instrument, and a party’s contrary assertion of meaning does not create a triable issue of fact.
- A price-escalation clause may validly adjust a contract price by reference to changes in the seller’s standard, uniformly applied trade prices, especially where the adjustment is capped and not left to unfettered discretion.
- Contract interpretation is a question of law suitable for summary judgment when the agreement is clear and material facts are not in dispute.

## Conclusion

The court enforced the subcontract’s escalation clause according to its plain meaning, holding that “prices for component materials” referred to Bethlehem’s regularly charged prices for the steel supplied to the project, and it upheld summary judgment for Bethlehem together with an assessment and mechanic’s lien foreclosure for the unpaid escalation amounts.


Bethlehem Steel Co. v. Turner Constr. Co., 2 N.Y.2d 456, 141 N.E.2d 590 (N.Y. 1957)