Full opinion text
FLOYD R. GIBSON, Circuit Judge. These appeals are from judgments entered by and from rulings of the District Court of the District of South Dakota made in a protracted jury trial on the issues presented in the complaint of Summit Construction Company, a South Dakota corporation, against Peter Kiewit Sons’ Company, a Nebraska corporation, and the counterclaim of Kiewit against Summit and General Life Insurance Company, a Washington corporation and surety for Summit. Monetary judgments were rendered against Kiewit in the amount of $1,097,856.47 Kiewit has appealed from the monetary judgment for breach of contract on the ground that the evidence was insufficient to justify the jury verdict and therefore urges that the judgment be reversed with directions that the matter be retried on the issues presented in Kiewit’s counterclaim. Kiewit also argues that even if the general verdict for Summit is sustained on appeal, the several verdicts of the jury must be significantly modified. Summit has cross-appealed from the trial court’s refusal to submit to the jury as consequential damages the following items: (1) Summit’s loss of future profits; (2) the attorney’s fees and costs and investigative expense incurred by General and charged to Summit under the indemnity agreement made as a condition to the bond; and (3) the attorney’s fees and costs incurred by Summit in disputes with its subcontractors arising as a consequence of Kiewit’s breach of contract. General Insurance has also cross-appealed from the trial court’s refusal to enter a judgment completely exonerating General under its surety contract. Complete exoneration is sought on alternative grounds. General contends it should be released since there was never a valid contract between Kiewit and Summit as there was no meeting of the minds and, assuming arguendo that there was a contract between Kiewit and Summit, the changes were so substantial and General’s risks so increased as to constitute a departure from its contract and bond. The three appeals arising from this diversity case were consolidated for submission and oral hearing but, insofar as they can be separated, will be considered separately and in order of their docketing in this court. The facts giving rise to Summit’s complaint and Kiewit’s counterclaim stem from a Subcontract executed on. August 21, 1961 between Kiewit and Summit for site work, excavation and backfill on a Minuteman Missile Project at Ells-worth Air Force Base near Rapid City, South Dakota. On August 1, 1961 Kiewit was awarded the prime construction contract on the project by the United States Government’s contracting agency. The project involved the construction of 150 underground launch facilities (hereinafter referred to as missile sites) and 15 underground launch control centers within an area 140 miles long and 90 miles wide near Rapid City, South Dakota. The project consisted of 15 flight groups, with 10 missile sites plus 1 launch control center constituting a flight. The 10 missile sites in each flight were positioned along the circumference of a rough circle several miles in diameter around a central control center and were connected with each other and with the control center by underground cable. A control center consisted generally of a large reinforced underground concrete structure, with surface housing, protective fencing, parking and roadway. A missile site was essentially comprised of three structures: (1) a waterproof concrete tube (hereinafter referred to as the silo) 14 feet in diameter extending from approximately 80 feet below natural ground level to the finished construction ground surface 4 feet above natural ground level; (2) a concrete cylinder nearly 10 feet in width called an equipment room was built around the silo and encased the silo from the -82 foot level to the finished construction ground surface (the silo and equipment room measured together had a diameter of about 34 feet); and (3) a 16x32x16 foot underground support building extending from the -12 foot level to the finished construction ground surface located approximately 18 feet from the equipment room. The various mechanical and electrical installations housed in the equipment room were connected by conduits to the support building. The lowest point at which the conduits left the equipment room was -28 feet, with most of the conduits leaving at the -22 foot level and entering the support building at close to natural ground level. Although surface construction of protective fencing, parking area and roadway was negligible, other minor structures such as jack pads and closure tracts were constructed at certain levels in the excavated area. Summit’s initial bid covered only site work and excavation and excluded the backfill work, but the executed KiewitSummit Subcontract covered both excavation and backfill at the 150 missile sites and the 15 launch control centers. Inasmuch as the contractual dispute does not centrally involve the work concerning the control centers, that part of the Subcontract will receive only passing consideration. Therefore, for the purpose of this opinion, Summit’s responsibilities consisted of clearing the missile sites, stockpiling the turf, excavating to the -32 foot level, and backfilling and compacting from the -32 foot level after completion of the silo, equipment room and support building. When it became apparent that Summit would have to accept the backfill work in order to get the Subcontract, Summit requested that an additional provision be inserted to clarify Summit’s backfill duties as it was cognizant of the difficulties in backfilling with pipe in the backfill area from observation of backfill operations at the Malmstrom Minuteman Project in Montana and at an earlier Titan missile project with which Summit had been connected. The provision added by Kiewit read as follows: “7. Backfill containing electrical and mechanical facilities to be done in the following manner: “The backfill is to be brought up to approximately one (1) foot above the pipe. “The mechanical and electrical Subcontractors are to excavate, lay pipes, & etc., and compact the backfill around and above the pipes, conduit, & etc. before this Subcontractor continues his operation.” The lump sum contract price of $2,601,-315 was agreed upon and the Subcontract executed on August 21, 1961. The agreed method of construction permitted Summit to excavate the first 12 feet with heavy equipment such as scrapers, resulting in a dish bowl-shaped excavation, but the following 20 feet of excavation could only be done by use of a backhoe. Below the -32 foot level another subcontractor was to drill a circular hole some 20 feet in diameter extending an additional 50 feet underground. The excavation sloped gradually down to the -12 foot level, but from there to the -32 foot level the excavation resembled a deep inverted cone. The diameter of the excavated area at the -32 foot level was approximately 40 feet, leaving only a three-foot wide shelf between the slopes of the excavation and the equipment room when the silo and equipment room had been completed. Due to the close quarters, much of the compaction of the backfill from the -32 foot level to the -20 foot level had to be done by hand tamping. As the cone widened above the -20 foot level, the area of operations between the side of the equipment room and the earth bank was sufficient to permit the use of other compaction equipment. Above the -12 foot level the area widened extensively which made possible the efficient usage of large tractors and rollers. The excavation, the temporary construction of fencing, roads and ditches, and the production and stockpiling of sand, gravel and earth for backfill progressed without significant incident until April 1, 1962. During the next ten days it became readily apparent that Summit and Kiewit were at odds in their interpretations of the backfill procedure defined in paragraph 7 of the additional provisions to their contract. Summit contends that the provision reflected its intention to have nothing to do with back-filling with pipe in the excavation, that the one foot above the pipe phrase meant Summit was to backfill to approximately ground level without any interference from either the electrical, mechanical or structural subcontractors. It is Summit’s position that after completion of this initial backfill stage the other subcontractors were then to re-excavate, install the necessary pipe and conduit, and backfill to the former level, from which Summit would complete the backfill operation to the finished construction ground surface. Summit’s complaint asserts Kiewit committed a substantial breach of special provision 7 by requiring Summit to work concurrently with the electrical, mechanical and structural contractors and to phase its backfill operation. Summit also alleges Kiewit was guilty of tortious conduct in that Kiewit hindered Summit’s performance of the contract by requiring Summit to perform work with relation to backfill in a manner entirely foreign to that contracted for and of such complexity as to destroy the contract, by changing schedule and completion dates relating to backfill so often and by interrupting Summit’s work to the point that it was impossible to restore the operation to a condition of normalcy, and by demanding and inducing Summit to embark upon a scope of work of such magnitude beyond the contract that Summit was unable to perform either its contract or the extra work demanded of it. Kiewit counters by arguing that Summit’s interpretation of special provision 7 would reach an absurd result because it would require the electrical, mechanical and structural subcontractors to re-excavate 28 of the 32 feet of backfill which Summit had just completed. Kiewit also maintains Summit’s interpretation is inconsistent with its actions and conduct during the time when it worked on the project. Subsequently Kiewit counterclaimed (as amended) for $2,185,401 against Summit for the cost of completing Summit’s work under the contract due to Summit’s allegedly unjustified abandonment of the contract. The trial court found special provision 7 of the Subcontract was ambiguous, thus leaving the proper interpretation of that provision for the jury’s determination. Since Kiewit has challenged the sufficiency of the evidence to sustain the verdict based on a breach of the Subcontract, we review the pertinent evidence concerning the Subcontract, including the interpretation that the parties placed upon the clause in their dealings and by their conduct. I. BREACH OF CONTRACT-SUFFICIENCY OF THE EVIDENCE In both October and December 1961 Kiewit informed Summit of proposed changes in Kiewit’s contract with the government. Each change involved relocation of pipe in the backfill area, with the first change order affecting only the control centers and the second affecting only the missile sites. Summit, because it felt its backfill work was to be done prior to the positioning of any pipe in the hole, replied in each case that the proposed change did not affect its contract. When Kiewit informed Summit these changes would mean delay, Summit did make submittals. In its October 16 submittal Summit also agreed to back-filling 2 pipes at each of the 15 control centers for $13,625. On November 27, 1961, Kiewit sent Summit a critical path progress schedule which indicated that the first backfill phase to 992 and the various piping was to be done within a four-day period. Summit’s Secretary-Treasurer Emme felt this plan was substantially consistent with Summit’s understanding of the backfill procedure since he felt Summit could complete its backfill stage in two days, leaving the other subcontractors two days to re-excavate, do their piping, and re-backfill. Kiewit argues that Summit’s failure to protest this plan, which seems to call for a concurrent work effort on the part of Summit and the other subs, was inconsistent with Summit’s interpretation of the contract. On February 14, 1962 Summit submitted a backfill plan to Kiewit containing the following language: “Where the penetrations take place in this area we will work in conjunction with the affiliated contractors and will backfill one foot above the elevation of the lines, and we will then compact on the opposite side of the equipment room while the excavation for these lines are made and the piping placed and the backfill material placed. This will take very close coordination with the mechanical and electrical contractors and other associates involved which we hope to have with them.” Kiewit views this plan as inconsistent with Summit’s interpretation because it would not be necessary for Summit to work in close coordination with the other subcontractors if Summit were entitled to backfill from bottom to top without interference. Summit says this language only reflects an agreement between Summit and the various subs that Summit would backfill in other areas of the site while the subs put in their stub-ins, with the understanding the agreement would terminate should the procedure result in delays to Summit. On April 2, 1962, Kiewit submitted its backfill plan to the Corps of Engineers stating “backfill will be placed approximately one foot above ‘pipe and conduit’ locations with a temporary suspension in specific areas such that ditching, pipe or conduit placement and refill may be accomplished.” Summit was neither shown the Kiewit plan nor informed of the changes made by Kiewit. In February or March, Summit subcontracted its backfill responsibilities to Plant-Dartnell Inc. for $574,000. The contract with Plant-Dartnell also contained a provision identical with special provision 7 of the Kiewit-Summit contract. On April 4, Kiewit wrote Summit it should instruct its subcontractor as to the special care required to protect installations in the backfill and the need for close cooperation with the other subs who would be working concurrently with the backfill operations. On April 5, Kiewit wrote to Summit and outlined a backfill procedure consisting of six phases, but the letter noted this suggested procedure was only to be a guide. Summit and Kiewit held a meeting on April 11, at which Kiewit instructed Summit to disregard the “6-phase” letter of April 5. Kiewit then asked Summit to prepare a three-phase two-stop backfill plan, which brought a protest from Summit that this would be outside its contract. After Kiewit agreed the plan would only be for a trial site, Plant-Dartnell prepared the requested plan and Summit submitted it to Kiewit on April 17. On the 19th Summit and Kiewit conferred on the three-phase plan with Summit again reiterating that the contract contemplated only one stop. Meanwhile Summit had begun to back-fill at site B-5, but was directed by Kiewit to move to another site. Upon Summit’s return to site B-5 on April 25, Summit found all the pipe installed above the level of the existing backfill at -20 feet. When Summit protested the presence of the pipe, Kiewit initially directed Summit to another site but subsequently ordered Summit back to site B-5 to complete backfill to the second level and above the pipe by April 30. Kiewit called a meeting of the other subs involved in the backfill area on April 28 and informed them the three-phase two-stop plan would be the official procedure. Although Summit protested this change would require corresponding remuneration for Summit, Kiewit replied that the matter of remuneration and designation of field responsibility was for the various subs to work out among themselves. From April 28 on Summit found pipe in the excavation when it began the second and third phases of the backfill operations. Prior to the start of backfill operations and throughout backfill work on the first sites, Summit, Plant-Dartnell and the other subs involved had held several meetings in an effort to determine each contractor’s backfill responsibilities. These negotiations were hampered from the outset not only because Kiewit failed to set forth a coordinated backfill plan in any of the subcontracts but also because these subcontracts did not delineate the extent of each sub’s contract price as payment for its backfill work. Without some division of backfill responsibility, it was literally impossible for Summit to judge whether the changes legitimately fell within section 4 of its Subcontract, which gave Kiewit the right to assign additional work to Summit for additional compensation, or constituted a change of scope going to the root of the contract. Indeed, there was no way to ascertain from the various subcontracts whether Kiewit had even fully assigned all backfill responsibility. Yet Kiewit kept the pressure on Summit by asserting that the backfill was Summit’s responsibility and if Summit did not reach agreements with the other subs, Kiewit would assign all backfill duties to Summit. Kiewit’s pressure tactics also were felt by Summit in the field. On April 30 Kiewit instructed Summit to put on a double shift in an effort to keep up with the original time schedule. At a May 10 meeting Kiewit insisted and Summit agreed to devote even more men to the job in order that the backfill might be returned to schedule. On May 11 came the first of several Kiewit orders directing Summit to backfill the other subs’ pipe. When Summit was unable to keep up due to the extra work and to several delays in the work of the other subs, Kiewit wired Summit on May 16 threatening to place Summit in default if the required progress rate was not maintained. Summit replied by wire on May 18th that the work imposed was beyond its contract and since no pay was forthcoming it was ceasing work. A flurry of meetings in the next few days culminated in Kiewit’s May 23 assignment of the pipe backfill work of GHO, Natkin, and American Bridge to Summit under section 4 of the Subcontract. While agreements between Summit and GHO and Natkin were drawn but never executed, Summit had indicated to Kiewit on May 21 that these agreements had been finalized. On May 24 Summit took over Plant-Dartnell’s subcontract. In attempting to calculate the cost of doing the work in the manner required by Kiewit, Summit retained Gigear Engineering and an outside engineer, Roy Ladd. In early May, Plant-Dartnell had conducted a test run at one of the sites to determine the rate of production with pipe in the hole and without pipe in the hole and had concluded the backfill rate unhindered by pipe in the hole was three and one-half times the rate when pipe was in the hole. On May 23 Ladd estimated the additional cost of doing the backfill as required by Kiewit at $529,-530 but warned that this figure contained very little margin of error. On June 2 Kiewit asked Summit to submit its prices for the work assigned on May 23 and stated if such prices were not submitted by June 6 Kiewit would consider the claims withdrawn. On the 6th Summit replied it was unable to submit its prices at that time and requested additional time. Backfill operations were still running behind schedule, partly due to delays in the pipe installations by the other subs but largely due to Kiewit’s insistence that Summit maintain the original progress schedule, which Summit agreed to with the understanding it was to back-fill without pipe in the hole. On June 5 Kiewit ordered Summit to add an extra crew to do backfill while pipe was being laid and on the 8th Kiewit ordered Summit to work Sundays. Finally, on June 15 Kiewit ordered Summit to run two 10-hour crews seven days a week. On June 21 Summit wrote Kiewit a letter which set out its increased costs due to the contract changes at $1,400,-771. Kiewit’s reply the next day asked for complete backup material to substantiate the alleged change of scope on the ground that Summit had earlier given assurance it had reached agreements with the other subs concerning compensation for the assigned work. Summit’s wire on the 23d that its continued work would assume Kiewit’s willingness to pay brought a barrage of three Kiewit telegrams that night containing an express negation of this assumption and a' demand for a complete statement of the change of scope, compliance with the previous schedule, and the immediate implementation of two 10-hour shifts. In answer to Kiewit’s request, Summit on June 26 summarized its claimed change of scope as follows: “1. Interupting [sic] the backfill operation at arbitrary lines and grades for the convenience of any or all contractors or subcontractors except the backfill operation. “2. Installation of pipe, conduit, concrete, etc. before completion of the backfill operation. “3. Backfill around the pipe, conduit, concrete, etc. “4. Interference to all backfill operation of all items placed in and over the fill area, before proper completion of the backfill.” At the Kiewit-Summit conference held June 29, Kiewit offered $143,000 as total compensation for the work involved by the change in scope and the increased complexity of the backfill operation. No agreement was reached at this conference and on June 30 Summit wired Kiewit it was stopping work due to Kiewit’s failure to pay for the extra work relating to backfill already done and due to Kiewit’s refusal to offer adequate payment for future work. Kiewit’s letter of July 2 terminated the contract due to Summit's alleged default but requested Summit to continue work “for the account” of Kiewit until Kiewit could take over the work. Summit cooperated by working 20 hours a day, seven days a week from July 2 to the 14th under this force account agreement. On July 3 a tentative agreement was initialed by Kiewit and Summit whereby Kiewit agreed to pay Summit an additional $450,000 for the back-fill work it assigned Summit on May 23. Formal signing of the agreement was to be deferred until Summit could obtain the consent of its surety, but on July 10 Summit wrote Kiewit the proposed compensation was unsatisfactory and it would need an additional $1,400,-000 in order to continue. On July 12 Kiewit wrote to Summit reinstating its termination of the contract, which had been orally suspended contingent upon execution of the July 3 agreement. Kiewit did pay the labor payroll for the force account period, but did not pay Summit’s equipment rental claim of $115,666 for that period. The trial court correctly ruled that special provision 7 of the KiewitSummit Subcontract was ambiguous and properly submitted the issue of interpretation of that provision to the jury. Having in mind the jury’s determination and the principle that upon appeal we view the evidence in a light most favorable to the verdict, we find the evidence, including the conflicting evidence, sufficient to warrant the verdict and now examine Kiewit’s specific contentions on the contract. A. THE CHANGE OF SCOPE Kiewit contends that any additional work required of Summit was covered by section 4 of the Kiewit-Summit Subcontract which authorized Kiewit to make additions to Summit’s work for commensurate compensation. A similar contention was raised in Saddler v. United States, 287 F.2d 411, 152 Ct.Cl. 557 (1961) with regard to a provision in a contract to provide materials and labor for the construction of a levee embankment which permitted the contracting officer to make changes in the contract specifications provided they were within the general scope of the contract. The government contracting officer made a change order requiring 7950 cubic yards of enbankment at the same unit price as in the original agreement for 5500 cubic yards. A second change order was issued requiring 13,264 cubic yards. The length of the levee and the total cubic yardage contained in its design were doubled (over the original plan) by the second change order and while riprap work accounted for approximately 60 per cent of the estimated total price under the original contract, it accounted for only 40 per cent of the total after the second change order. The Court of Claims held that the “changes” article of the contract permitted only those changes in contract specifications that were within the general scope of the contract for which an equitable adjustment was to be made in the contract price. The Court said the number of changes alone is not determinative of whether alterations are outside the scope of the contract and rationalized that the point at which a change becomes too substantial is really a matter of degree. In Saddler a breach was found because the substantial change resulted in more than doubling the amount of earth to be placed, in extending the contract period significantly, and in requiring the contractor to return equipment, which the contractor no longer thought was needed, to the jobsite a hundred miles away. In the instant case there is clearly sufficient evidence to find that the changes ordered by Kiewit went so beyond the scope of the Subcontract, including the “changes” provisions of section 4, as to breach the Subcontract. Instead of permitting Summit to back-fill in a two-phase operation unimpeded by pipe in the hole as agreed in special provision 7, Kiewit required backfilling to be done in three phases after pipe had been laid and thereby increased immeasurably the difficulty of the backfill operation. The original estimated cost of $600,000 was increased over threefold to approximately $2,000,000 by this change in the method of backfill. The change of scope is plainly manifested in the 300 per cent increase in backfill costs and is likewise reflected in a well over 50 per cent increase in the cost of performing the overall Subcontract. Sad,dler stands as precedent that changes of scope of much less magnitude than this have been found to be substantial breaches of contract. See also Oberer Construction Co. v. Park Plaza, Inc., 18 Ohio O.2d 198, 179 N.E.2d 168 (Ct. C.P., Montgomery Co. 1961) (where a change requiring the removal of 35-40,-000 more cubic yards of excavation than the original 190,000 cubic yards was found to be a substantial breach). Kiewit also maintains Summit’s method of proving that there was a substantial change in the scope of the Subcontract by proving the difference between the actual cost of backfill performed to June 30 and Summit’s original bid estimate is generally not acceptable because this computation assumes that the original contract price or cost estimate was reasonable. The cases which Kiewit cites for this proposition are not apposite because they reject this formula only as to proving damages — not as a method of proving liability for breach of contract due to a substantial change of scope. See F. H. McGraw & Co. v. United States, 130 F.Supp. 394, 399-400, 131 Ct.Cl. 501 (1955). Furthermore, the Court of Claims in Saddler at least gave tacit approval of proving change of scope of a contract by showing the difference between the final contract price over the original contract price. Kiewit further contends that Summit’s failure to allocate the backfill costs as to weather conditions, extra work, and so forth causes the lump sum figure given as backfill cost to lack probative value in showing the alleged change of scope. Kiewit bolsters this charge by pointing to section 6 of the Subcontract which expressly states that Summit will not be compensated for any delays it suffers due to acts of Kiewit or the other subs and to the evidence that 314 crew shifts, or 41 per cent of the number possible from the start of backfill operations to June 30, were lost due to rain and other factors not attributable to Kiewit. Lichter v. Mellon-Stuart Co., 305 F.2d 216 (3d Cir. 1962), urged as support for Kiewit’s position, is distinguishable on its facts. Lichter does state a contract may validly provide that a contractor shall be entitled to no relief except an extension of the time of performance if circumstances beyond his control delay his work, even though such delay does in fact increase his costs, but Lichter is not concerned with an increase in a subcontractor’s costs caused primarily by a change in scope of the contract. It is patent that the disclaimer provisions of section 6 of the Kiewit-Summit Subcontract are not applicable when Summit’s increased costs are the result of a substantial change of scope of the Subcontract. The question raised as to the correctness of Summit’s allocation of its backfill costs was an evidentiary matter that was properly submitted to and considered by the jury. Also, in connection with proving the extent of increased costs in the liability phase of the trial, Kiewit objected to the admission of Exhibit 154 (which summarized Summit’s actual backfill costs) on the ground it did not comply with two requirements of the Uniform Composite Reports as Evidence Act. First, the exhibit is objected to on the ground that Frank Short, who prepared it, was Summit’s regular accountant, and consequently could not possess the objectivity contemplated by the statute’s requirement that the preparer of the report not be an employee of the offering party. This objection can be dismissed on its face as Short was an independent accountant employed for the purpose of making this report and thus comes under the exception set forth in the statute. Secondly, though the exhibit was presented to Kiewit at the pretrial conference immediately preceding the trial, Kiewit objects that there was no specification or identification of the exhibits or records upon which the composite report was based nor was there any identification of the witnesses who had oral communications with the preparer of the report. While Summit did make available all its records concerning the entire project, Kiewit asserts the statute requires more than a “lumping” of exhibits, which procedure imposes upon the party against whom the composite exhibit is offered the burden of determining what records form the basis of the report. There are no South Dakota cases interpreting this part of the statute (§ 19-6-16 in the revised annotated volumes). Nebraska and Ohio'are the only two jurisdictions in addition to South Dakota that have adopted the Uniform Act. In Trute v. Skeede, 162 Neb. 266, 75 N.W.2d 672, 682-83 (1956), the Supreme Court of Nebraska construed the provision in question as permitting the trial judge to admit the evidence even though no copy of the report was given to the adverse party before trial if the trial judge finds that no injustice would result from the failure to give such notice. In the instant case where the composite report was given to Kiewit at a pretrial conference and where Kiewit had access to Summit’s records throughout the trial, it cannot be said to be an abuse of the trial court’s discretion to admit the composite report without requiring Summit to specify the records from which the composite report was compiled. Also, from the record it is clear the trial court was aware of the statutory requirements for admission under the Uniform Composite Reports as Evidence Act and held that a proper foundation had been laid for the admission of Exhibit 154 in the liability phase of the case. B. PREVENTION OF PERFORMANCE It is hornbook law that an implied provision of every contract is that neither party to the contract will do anything to prevent performance thereof by the other party or commit any act that will hinder or delay performance. Northeast Clackamas C.E. Co-op. v. Continental Cas. Co., 221 F.2d 329, 334 (9th Cir. 1955); George A. Fuller Co. v. United States, 69 F.Supp. 409, 411-12, 108 Ct.Cl. 70 (1947); Restatement of Contracts, § 315(1) (1932). By installing pipe in the holes prior to the backfill operations, Kiewit so hindered Summit’s performance of the Subcontract as to amount to a substantial breach of that Subcontract. C. REPUDIATION BY BAD FAITH OFFER TO COMPENSATE Assuming Kiewit’s assignment of the backfill obligations of GHO, Natkin, and American Bridge to Summit on May 23 was .within its contractual rights under section 4 of the Subcontract (which legal conclusion we do not think valid for reasons previously discussed), Kiewit’s meager offer of $143,000 on June 29 as compensation for all the extra backfill work is so lacking in good faith as to constitute a repudiation of the Subcontract. As stated in W. J. Walker v. Shasta Minerals & Chemical Co., 352 F.2d 634, 638 (10th Cir. 1965), an offer to perform made in accordance with the promisor’s interpretation of the contract, even though erroneous, is not such a clear refusal to perform as to constitute an anticipatory breach if that offer was made in good faith. Kiewit’s lack of good faith is evident from its $143,000 offer, which was but 10 per cent of Summit’s estimate (the accuracy of which was subsequently borne out by Kiewit’s counterclaim for $2,185,401, its cost of completing the Subcontract), and its June 29 comment to Summit that the latter could do better with the other subs than it could with Kiewit in arranging some backfill settlement. Kiewit further contends that even assuming arguendo its $143,000 offer constituted a repudiation of the Subcontract, the repudiation was nullified because this offer was revoked by the parties’ resumed negotiations and their initialed agreement of July 3 before Summit had materially changed its position or brought suit for damages. Although we acknowledge the sound precedent of Quivirian Development Co. v. Poteet, 268 F.2d 433, 439 (8th Cir. 1959) supporting this contention, we also note there is evidence that Summit had pulled its crews off the job and had commenced removal of its equipment as of June 30. Furthermore, Quivirian is concerned only with an anticipatory breach, while here we are dealing with an actual breach. Nevertheless, it is not necessary for us to resolve this issue inasmuch as the jury’s verdict assessing a breach against Kiewit was warranted by the evidence on any of the several grounds discussed above and the jury’s factual determination is controlling. D. ELECTION OR WAIVER Kiewit contends that Summit elected not to treat the May 23 assignment as a substantial breach of contract because Summit did not protest the assignment, but instead continued backfill work for another month and accepted two progress payments after May 23. Kiewit cites Pasquel v. Owen, 186 F. 2d 263, 271 (8th Cir. 1950), which quotes section 688 of Williston on Contracts with approval, for the following principle: “* * * [W]herever a contract not already fully performed on either side is continued in spite of a known excuse, the defense therefore is lost and the injured party is himself liable if he subsequently fails to perform, unless the right to retain the excuse is not only asserted but assented to.” In Pasquel, Mickey Owen signed a contract to manage and play baseball in Mexico. After about five weeks of managing he was relieved of his position, but he continued on as a player without protest and continued to receive compensation for a month, at which time he abruptly left Mexico and returned to the United States. The owner of the Mexican team sued Owen for breach of contract. Owen argued that the owner had committed a substantial breach of contract by relieving Owen from his managerial position, thus excusing Owen from any obligation for further performance. The Eighth Circuit ruled under Missouri law that Owen elected to continue under the contract by playing ball for a month after the alleged breach and by accepting compensation under the contract. Kiewit correctly points out the crux of the doctrine of election is that the law will not permit a party to exercise two alternative or inconsistent rights or remedies, therefore, an election can be made even though there was no apparent intention to surrender a right. 5 S. Williston, Contracts § 684 (3d ed. 1961). However, the Court of Appeals in Pasquel carefully limited the doctrine of election to those instances in which a party continues performance “in spite of a known excuse.” In the instant case there was no way in which Summit could ascertain the extent of the change of scope except by experience. Therefore, it was impossible for Summit to determine on April 25 whether backfilling with pipe in the hole in a three-phase operation was legitimately within section 4 of the Subcontract or whether it constituted such a substantial change of scope as to breach the Subcontract. The three-phase operation started first as an experiment, then was assigned to Summit on May 23 with both an express and implied promise of additional compensation. The magnitude of the change of scope became more and more apparent with the passage of time. Summit was still protesting but trying to cooperate. It seems clear that since Summit cannot be held to have had either actual or constructive notice of its excuse until June 30 when it became apparent reasonable compensation for the additional work was not forthcoming from Kiewit, Summit cannot be deemed to have elected to continue under the Subcontract. See Saddler v. United States, 287 F.2d at 414. Johnson v. De Waard, 113 Cal.App. 417, 298 P. 92 (1931), makes clear that one will not be penalized by the doctrine of election for making good faith efforts to resolve contractual differences, and this rationale is particularly persuasive in the instant case since Summit was bound by the open-ended nature of section 4 of the Subcontract to perform additional work assigned to it by Kiewit. In the De Waard case the prime contractor on a storm drain project subcontracted the excavation of the tunnel to the plaintiff. While the plaintiff’s work was in progress, the prime contractor constructed concrete walls in one end of the tunnel without the plaintiff’s consent, forcing the plaintiff to suspend work in the upper part of the tunnel and to carry the excavated material much further than would otherwise have been necessary. When the prime contractor subsequently refused to pay plaintiff as agreed, plaintiff ceased work. The First District Court of Appeal of California held that the plaintiff was entitled to do its work without the prime’s interference and that the plaintiff did not waive its right to sue for breach of contract by continuing work for several weeks after the prime started construction in the tunnel. The court found the plaintiff did not intend to waive its rights and no inference of relinquishment could be made since efforts were being made to adjust the contractual differences and only when these efforts appeared hopeless did the plaintiff cease work. Summit protested from the very beginning when Kiewit hinted that it was thinking in terms of a three-phase back-fill operation rather than the two-phase operation initially conceived. It was because Summit protested that it would need more money if a three-phase operation were to be used that Kiewit referred to the first site backfilled in three phases as a trial site. Summit vehemently protested Kiewit’s placement of pipe in the hole ahead of its backfill operations beginning on April 25. When Summit demanded more money Kiewit tried to avoid its responsibility by informing Summit the matter of additional compensation was for Summit to work out with GHO, Natkin, and American Bridge, the other subs with backfill duties. Summit did negotiate with these three subs to no avail and finally Summit accepted Kiewit’s assignment of all backfill responsibility on May 23, with the understanding that reasonable compensation would be paid for this extra work. By the time of the assignment it had become readily apparent that backfilling in three phases with pipe in the hole was substantially increasing the scope of Summit’s work obligation. Yet Summit continued to work in good faith while at the same time it sought to reach an equitable settlement with Kiewit for this extra back-fill work. Only when it became apparent from Kiewit’s paltry offer of $143,000 on June 30 that Kiewit did not intend to negotiate in good faith did Summit stop work. It was Kiewit, not Summit, who drew the open-ended section 4 of the Subcontract and it was Kiewit who invoked section 4 by first requiring Summit to backfill in three phases with pipe in the hole and by subsequently assigning Summit the backfill duties of the other three subs on May 23. Consequently, Summit cannot be held to have elected to continue under the Subcontract by working until June 30 when it is realized that had Summit refused to do the additional work imposed by Kiewit, Summit would have subjected itself to the very real possibility of a potential breach of section 4. In conclusion, the allegation that Summit elected to proceed under the changed Subcontract does not appear to be substantiated by the evidence, and in any event this issue was properly submitted to the jury for its determination. II. SUBMISSION OF ISSUE OF TORTIOUS CONDUCT Kiewit claims it was prejudiced by the submission of the tortious conduct and duress charge contained in Summit’s complaint. There is sufficient evidence in the record to warrant the submission of Summit’s tort claim to the jury. Summit as an operating entity was impaired by Kiewit’s breach of the contract and by Kiewit’s demand for additional work under the contract for which it failed to properly compensate Summit. The submission of the tortious conduct and duress issue was not error. However, since the jury verdict in favor of Kiewit on this point was not appealed by Summit, no further consideration of this issue is necessary. III. DAMAGES — COMPUTATION AND AMOUNT The prime contract with Kiewit, being a contract with the Government, is governed by federal law. Sam Macri & Sons v. United States. 313 F.2d 119, 124 n.1 (9th Cir. 1963); Ivanhoe Irrig. Dist. v. McCracken, 357 U.S. 275, 289, 78 S.Ct. 1174, 2 L.Ed.2d 1313 (1958). However, a subcontract between private parties, as is the case here, is governed by state law. Sam Macri & Sons v. United States, 313 F.2d 119 (9th Cir. 1963); Continental Casualty Co. v. Schaefer, 173 F.2d 5, 7-8 (9th Cir. 1949), cert. denied 337 U.S. 940, 69 S.Ct. 1517, 93 L.Ed. 1745 (1949). Kiewit contends that since the Subcontract involved a government project, the damages test set out in United States v. Behan, 110 U.S. 338, 4 S.Ct. 81, 28 L.Ed. 168 (1884) — expenditures (less the value of material on hand) plus the profits that would be realized by performance of the whole contract, if they are capable of proof — should have been applied. But, Burstein v. United States, 232 F.2d 19 (8th Cir. 1956) relied on by Kiewit for this contention, involved a direct suit against the Government on a prime contract as did Behan. The rule that contractual disputes between private parties on a subcontract pursuant to a government project are governed by state law has been followed by the Eighth Circuit. Frank Sullivan Company v. Midwest Sheet Metal Works, 335 F.2d 33 (8th Cir. 1964); Blair v. United States, 147 F.2d 840, 849 (8th Cir. 1945). The trial court properly applied the law of South Dakota on the damages for breach of contract. Kiewit and Summit both agree that the cost of completion must be estimated as nearly as possible according to the circumstances as they exist at the time of the breach. J. D. Hedin Construction Co. v. F. S. Bowen Electric Co., 106 U.S.App.D.C. 386, 273 F.2d 511, 513 (1960). However, Kiewit contends that the trial court improperly applied this rule to the instant case. Kiewit also argues that the estimate of Summit’s President Rounds alone is inadequate to establish Summit’s cost of completion, citing Autrey v. Williams and Dunlap, 343 F.2d 730, 742 (5th Cir. 1965). The very terse discussion of this point in Autrey — no mention is made of the experience of the contractor making the estimate or the novelty or lack thereof in this type of construction — is based entirely on Louisiana law, which provides us with little precedent in the instant case. The case of Haddad v. Western Contracting Co., 76 F.Supp. 987 (N.D. W.Va.1948), which was also cited by Kiewit for this proposition, did reject the plaintiff-contractor’s estimate of lost profits but not on the ground that such estimates are not acceptable. Haddad recognized the right to lost profits and that only reasonable certainty is required in the estimation but refused to award damages of lost profits because the plaintiff-contractor did not state the amounts and the estimated cost of labor and materials at current market prices needed to complete the job. The South Dakota Supreme Court has articulated a “reasonable certainty” test concerning the proof needed to establish a right to recover damages: “While the nature of the case may not permit estimating damages with certainty, it is the rule in this state that the matter of measuring damages may not be left to mere speculation on the part of the jury. Facts must exist and be shown by the evidence which afford a basis for measuring the loss of the plaintiff with reasonable certainty.” Kressly v. Theberge, 79 S.D. 386, 112 N.W.2d 232, 233 (1961). In Frank Sullivan Company v. Midwest Sheet Metal Works, 335 F.2d 33 (8th Cir. 1964) the Eighth Circuit applied Minnesota law and sustained a verdict awarding damages on the basis of an estimate of cost of completion by the plaintiff-contractor’s employee Elnicky. The following from the Court’s discussion would seem dispositive of this point: “Elnicky’s concession on cross-examination that when he figured a job ‘We do not know how much is going to be overhead or how much is going to be profit * * * ’ and that labor costs on a job are ‘guesstimates’, do not strike us as concessions of a lack of reasonable certainty. The contracting business is hazardous and small errors or unforeseen developments can be costly. See Southern Fireproofing Co. v. R. F. Ball Constr. Co., 334 F.2d 122 (8 Cir. 1964). But this does not disqualify a competent and experienced contractor’s best estimate, reasonably compiled, as acceptable evidence. To hold otherwise would tend to bar recovery in all construction cases.” Id. at 41-42 (emphasis added). Kiewit’s attempted distinction of Sullivan on the ground that no partial performance of any kind had been rendered at the time of breach and therefore the contractor’s estimate was the only means available to the plaintiff ,to prove damages is not persuasive. We think only reasonable certainty, not absolute certainty, is required in estimating damages and that doubts are generally resolved against the party committing the breach. This is particularly true in situations such as this where precise proof of the amount of damages is difficult if not impossible. Air Line Pilots Assoc., Int’l v. Northwest Airlines, Inc., 415 F.2d 493 (8th Cir. 1969). Kiewit also contends that Rounds’ estimate of the cost of completion was speculative and unreliable for the following reasons: 1. It was premised solely on the validity of the original estimate without regard to actual costs incurred to date of abandonment; 2. The equipment costs which Rounds used in estimating cost of completion were considerably less than the equipment charges Summit demanded from Kiewit for Summit’s force account work; 3. It failed to include the cost of performing Change Order No. 2; 4. Rounds’ estimate of the cost of completion was made on the premise that the quantities stated in Kiewit’s original invitation for bids were accurate. It failed to take into account actual quantities needed as of June 30 to finish the job and erroneously assumed that the 310,000 cubic yards of select material contained in the invitation for bids called for “loose” yards and not “in-place” yards; 5. In determining the cost of completion of the backfill portion of the Subcontract, Rounds utilized the Summit-PlantDartnell subcontract price even though this subcontract had been abandoned in early June and Kiewit’s approval of Plant had been withdrawn on May 24. Under the circumstances, use of this subcontract as the basis for estimating cost of completion of the backfill was speculative and without probative value; 6. The complexity and novelty of this missile project coupled with Summit’s inexperience with a construction project of this character made any estimate of profits speculative and conjectural. This Court recognizes that a new estimate of the cost of completion will generally be more reliable than the contractor’s optimistic initial estimate “since as the work progresses difficulties and risks are encountered and the efficiency of the builder is tested, by reason whereof the possible error in estimating the cost of completing the remainder is reduced.” E. Patterson, Builder’s Measure of Recovery for Breach of Contract, 31 Colum.L.Rev. 1286, 1293 (1931). Under cross-examination Rounds stated that he did take into account the costs of installing culvert in the spring of 1962, but he did not use actual cost figures in estimating future labor and gravel costs because past experience on the job was so disrupted by the breach of the Subcontract and so interrupted by moving men from gravel operations to backfill and vice versa that there was no way to use these figures with any degree of certainty. Rounds also admitted using his original estimate in computing the cost of completing the sewage lagoons, but only because none of the lagoons had been constructed by June 29. It appears that, even though Summit would be excused from computing cost of completion based on actual costs incurred to June 30, 1962 since those costs reflect the disruption of the backfill and the consequent maneuvering of Summit’s men and equipment due to Kiewit’s breach, Rounds’ estimates were not technically based on the initial estimates anyway. Rounds based his estimate of equipment costs on the Associated General Contractor’s Cost of Ownership Manual in effect on June 30, 1962 (which happened to also be in effect and used by Summit when it made its original bid a year earlier). Although Kiewit points out that Rounds did not adjust the Manual’s rates, as suggested by the Manual, to reflect Summit’s own cost experience, nevertheless this rating method and Summit’s cost experience in general were the subject of intensive cross-examination by Kiewit and evidently the rate charged by Summit was found to be reasonable by the jury. As to labor costs, Rounds utilized the rates under which the job was bid — even though those were not the actual rates it was paying on June 30, 1962 — since Kiewit and Summit had an oral agreement outside the Subcontract that Kiewit would reimburse Summit for all increases above the labor rates existing on July 3, 1961 This approach was proper as use of the increased labor rates would be washed out by a corresponding increase in the contract price. Kiewit further suggests that the Court erred in refusing to allow Kiewit to inspect certain tentative equipment rate schedules later kept by Summit as an experiment in which Summit charged itself rental on equipment it owned in order to develop cost experience in the field of equipment rental. In reply to this contention, Summit maintains that these rates are irrelevant to any issue in the present case since they were first used long after Summit had ceased working for Kiewit under the contract at issue here. Also, these rates affected only a few of the pieces of equipment used in the backfill work. The trial court examined these rate schedules in camera and denied Kiewit’s request to inspect them on the grounds the rates were first used long after the summer of 1962 and were thus irrelevant, and the rates were privileged information which Summit, Inc., as a competitor of Kiewit in certain areas, need not produce. We see no reason and Kiewit cites no cases which would lead us to overrule this determination of the trial judge. As to the significant differences between Rounds’ estimate of equipment costs in figuring costs of completion and the amounts he used in Summit’s force account claim, Rounds testified under cross-examination that the higher costs during force account work were the result of operating under the supervision of someone else. The base rental charge as set forth in a Rate Book used by the South Dakota Highway Department and the Associated General Contractors of South Dakota provided the basis for Rounds’ calculations on the force account. The Rate Book set forth a base rental rate for the first eight hours worked per day and one-half this base rate for each hour worked over eight hours and applied the same method of computation to standby time as to working time. Charge was made for a 20-hour day, which was the work schedule set by Kiewit. The equipment was required by Kiewit for the work requested and the crews were fielded at Kiewit’s request regardless of weather and other delaying factors. The records reflect the type of operation required for the force account. The force account was hectic, a 20-hour day operation that was handled on a crash basis. These evidentiary matters were for the jury’s consideration and we as an appellate court do not try issues de novo. Kiewit’s contention that Summit did not include the cost of completing Change Order No. 2, which consisted of backfilling around the brine lines at the launch control centers, appears immaterial as this cost was to be added to the contract price and was not a part of it. Kiewit maintains that the furnishing of select material for backfill represented a substantial portion of the uncompleted part of the Subcontract and that in figuring its cost of completion Summit erred by assuming the 310,000 cubic yards of select which were called for in the invitation and bid meant “loose” yards, not “in-place” yards. Kiewit supports this assertion with two items: (1) a Subcontract provision which states that the price per cubic yard of select “in-place” backfill, if additional work needed to be done, is $2.70— exactly the same price per cubic yard contained in Summit’s bid; and (2) a special provision in the Summit-Plant subcontract which states that the amount of gravel in the stockpile for backfill purposes was figured on an “in-place” basis. On cross-examination Rounds replied that the original invitation and bid figures for select backfill were based on “loose” yards and that he used these figures less the amount of select already furnished (according to the records of Summit’s employee Leon Henry) to arrive at his figure of 128,918.5 cubic yards needed to complete the Subcontract. These issues are again evidentiary matters which were properly submitted to the jury for its determination. In estimating the cost of completing the backfill part of the Subcontract, Rounds used the price it had subcontracted to pay Plant-Dartnell for this work, had that subcontract been performed. This subcontract with Plant was no longer in existence on June 29, 1962, the agreed date of breach, but the probative value of the estimate was for the jury’s determination. Kiewit’s assertion that the novelty of the work plus Summit’s inexperience at this work preclude the possibility of Rounds’ calculations being reasonably certain has been answered by this Court in Frank Sullivan Company v. Midwest Sheet Metal Works, swpra, in which we refused to construe the reasonable certainty test as a bar to the admission of a reasonably compiled estimate by an experienced and competent contractor in recognition of the reality that to deny admission of such estimates would effectively prevent recovery in all construction cases. Summit was an experienced dirt contractor and Rounds’ qualifications were significant: a civil engineering degree, 20 years in the contracting business, and chief estimator for Summit during that entire time. A. CLAIMED ERRORS ON DAMAGES In Special Verdict No. 1 (the claim for loss or gain on the uncompleted part of the Subcontract) the trial court instructed the jury to “deduct the sum of $80,-440” from any sum it found Summit entitled to under the Davis v. Tubbs formula. Summit’s witnesses arrived at this $80,440 figure by .taking the percentage of the total backfill work completed as of June 29, 1962 times its original backfill bid estimate (including profit) of $600,-000. In Special Verdict No. 2 Summit was allowed to recover the full amount of its backfill expenditures to June 30, 1962, plus 15 per cent profit and overhead. The effect of this manner of submission, according to Kiewit, was to allow Summit to use: (1) the Davis v. Tubbs cost of completion rule on all items of the Subcontract except backfill, and (2) quantum meruit on backfill expenditures. This treatment of damages appears warranted because on work over and beyond the contract or in addition to the contract either quantum meruit or cost plus must be applied; and on the Subcontract, loss of profit is proper. Kiewit argues that this submission errs in accepting as a matter of law that $80,440 was contract value for the back-fill done, rather than leaving this determination for the jury’s decision, and errs in permitting a double recovery to the extent that backfill expenditures recovered on quantum meruit were expenditures which necessarily were incurred in the performance of the backfill portion of the Subcontract to June 30. Kiewit’s double recovery contention is without merit. The estimated bid cost of the backfill work including profit was $600,000. Summit’s testimony was that about 13 per cent of the backfill work had been done, or in terms of contract value (which includes overhead and profit), $80,440 worth of back-fill work had been done by June 30, 1962. Because of the vast change in scope of this backfill work as a result of Kiewit’s breach, the completed backfill work was treated by Summit as an extra work claim for which quantum meruit recovery was sought and awarded. Since Summit was awarded $412,173.45 (for actual expenditures plus 15 per cent for overhead and profit) in quantum meruit for the completed backfill work, the trial court correctly instructed the jury to reduce Summit’s recovery for lost profits on the uncompleted part of the Subcontract proper by the $80,440 contract value of this completed backfill work. The $80,440 was a mathematical calculation used by the court to eliminate any double recovery on this submission, and was not a factual issue that should have been submitted to the jury. Kiewit contends the trial court’s Instruction 12 (on damages) was in error in instructing the jury that in determining Summit’s cost of completion the quantities must approximate the quantities stated in Kiewit’s invitation for bids. Kiewit asserts that the holding in State Highway Dept. v. MacDougald Const. Co., 102 Ga.App. 254, 115 S.E.2d 863 (1960), substantiates its contention in that Kiewit’s invitation for bids and the Summit-Kiewit Subcontract expressly provide that it was a lump sum contract, which thereby should prohibit the quantities set out in its invitation from being controlling. The MacDougald case however is not apposite. MacDougald held that where the state highway department specifically stated in its invitation for bids that the quantities set out for the job were not guaranteed and were not binding on the department the contractor could not, under guise of mistake of fact, recover additional compensation because the material excavated contained a higher percentage of rock than represented. Inasmuch as the court instructed the jury to use Kiewit’s estimates as approximations in making its cost of completion calculation, Kiewit’s express disclaimer as to the accuracy of these estimates would not preclude their use in determining damages on the ground of lack of probative value. Kiewit contends that Instruction 6 in the damages phase of the trial, which permitted Summit to eliminate general overhead expense in determining its cost of completion, enabled Summit to recover more than it would have actually received upon full performance of the Subcontract. There is a sharp division in the cases on whether overhead expense must be included as a cost of completion