Contracts II, Pages 927–933

K & G Construction Co. v. Harris

Court of Appeals of Maryland, 1960

Facts:

Plaintiff, a construction company, was building a project and contracted with defendants to do excavating and earth-moving work on the project. This contract included requirements that all work be done in a workmanlike fashion, defendants carry liability insurance, defendants submit monthly requisitions, and plaintiff pay the requisitions. While leveling the yard on August 9, defendants' bulldozer operator hit the house and collapsed a wall, doing $3,400 in damage. Defendants and their insurance carrier refused to pay, claiming that they were not liable. Plaintiff did not give written notice to defendant for any services or materials plaintiff gave them. Plaintiff was satisfied with defendants' work besides where they destroyed the wall.

On July defendants had submitted their monthly requisition for work done prior, which was due to be paid by August 10. After defendant destroyed the wall on August 9, plaintiff refused to pay the requisition because the bulldozer damage had not been paid for. Defendants continued working for another month, at which point they discontinued working due to plaintiff's refusal to pay but said they would return if plaintiff did pay them. The unpaid sum at that point was $1,484.50. They had $1,340's worth of work remaining to do, and it cost plaintiff $450 to have another contractor complete the remaining work.

Plaintiff sued for the damage to the house and the $450 it cost to replace defendants. Defendants counterclaimed for recovery of the $1,484.50 and for the loss of the expected $1340 of profit.

Procedural History:

The jury found for plaintiff on the first count for $3,400. The CC judge found for defendants on the second count and the counter-claims in the amount of $2,824.50, which was appealed.

Issue:

Can a contractor withhold an installment payment for the subcontractor's failure to perform a portion of his work in a workmanlike manner when the contract says it is due the subcontractor unless negligent work excused it?

Defendant's Argument:

Plaintiff's failure to pay on August 10 constituted a material breach and released defendants from any further obligation to perform.

Plaintiff's Argument:

Defendants' failure to perform his work in a workmanlike manner constituted a material breach and justified plaintiff's refusal to pay on August 10. Defendants then had no right to cease performance.

Rules:

  • LexisNexis IconWestLaw LogoGoogle Scholar LogoPage 931–932

    There is a presumption that mutual promises in a contract are dependent and are to be so regarded, whenever possible. . . . [T]he intention of the parties, as shown by the entire contract as construed in the light of the circumstances of the case, the nature of the contract, the relation of the parties thereto, and the other evidence which is admissible to assist the court in determining the intention of the parties, is the controlling factor in deciding whether the promises and counter-promises are dependent or independent.

  • When a total breach occurs, the injured party can treat the breach as only partial and still require performance.

Reasoning:

The promises were mutually dependent, as the parties intended each's performance to be conditional on the other's. Holding that contractor has to continue to pay a subcontractor for his work, regardless of the skill he exhibited and requiring the contractor to sue for damages afterwards, would lead to many contractors to become insolvent before completing their contracts.

The breach was material as the damage was over double what defendants were to be paid. This justified plaintiff to stop making payments and invalidated defendants' justification of their breach. Plaintiff treated the total breach as partial, still requiring defendant to finish the excavating work.

Holding:

Plaintiff was allowed to withhold payment for defendant's material breach of contract. Reversed. Judgment for plaintiff for $450 and costs.

Dropbox – Your stuff, anywhere – Try it free