K & G Construction Co. v. Harris

Facts

K & G Construction Company owned a housing subdivision project and served as its general contractor. Harris and Brooks, the subcontractor, agreed to do the excavating and earth-moving work. The contract required the work to be done in "a workmanlike manner, and in accordance with the best practices." Time was of the essence, and the contractor was to make monthly progress payments by the 10th of the following month. On August 9, 1958, a bulldozer operator employed by the subcontractor drove too close to the contractor's house. A wall collapsed, and the damage was $3,400. The subcontractor and its insurer refused to pay or repair, claiming no liability. The contractor then refused to pay the subcontractor's July requisition, due August 10, 1958, because the house had not been repaired or paid for. The subcontractor kept working until September 12, 1958, then stopped and refused to return unless paid. Its unpaid completed work was worth $1,484.50. The parties stipulated that the subcontractor would have made a profit of $1,340.00 on the remaining work. They also stipulated that it cost the contractor $450 more than the contract price to have another contractor finish the job.

Issues

1. Does a contractor, damaged by a subcontractor's failure to perform work in a workmanlike manner, have a right, under the circumstances of this case, to withhold an installment payment that was otherwise due under the contract?
2. If the withholding was justified, did the subcontractor breach the contract by stopping work, so that it owed the contractor the added cost of finishing the job?

Holding

The promises to perform workmanlike work and to make monthly payments were mutually dependent. The subcontractor's negligent damage was a material breach, so the contractor could refuse the August 10 payment. The subcontractor's later stopping of work was itself a breach, making it liable for the $450 extra cost.