Category Archives: conditions precedent

CHECK THE BOXES REGARDING CONTRACTUAL CONDITIONS PRECEDENT TO PAYMENT

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Remember this: complying with contractual conditions precedent to payment is important. There is a reason why construction contracts include contractual conditions precedent to payment. The contract does not include this language for sh*ts and giggles. This language is included to establish what is required of the payee before payment becomes due. There may be conditions precedent to the payment of progress payments. There may be conditions precedent to the payment of final payment. Payment is not due until the conditions precedent have been satisfied. Do yourself a favor and consider this language in the construction contract, particularly if a dispute arises. If the condition precedent has not or cannot be satisfied, game plan as to the factual reason. The best thing to do is be prepared – check the boxes regarding conditions precedent to ensure you have considered this contractual language.

In a recent case, Age of Empire, Inc. v. Ocean Two Condominium Association, Inc., 2023 WL 4917089 (Fla. 3d DCA 2023), a contractor entered into a restoration contract with a condominium association. The contract provided that final payment was not due until the contractor furnished a final contractor’s payment affidavit (in accordance with Florida Statute s. 713.06). The contractor filed a lawsuit for final payment. However, the contractor did NOT furnish its final contractor’s payment affidavit prior to filing the lawsuit. Thereafter, the contractor filed an amended complaint attaching a final contractor’s payment affidavit that it served AFTER if filed the original lawsuit. The association moved to dismiss arguing that the final contractor’s payment affidavit, and date therein, demonstrated the contractor failed to satisfy a contractual condition precedent prior to filing the original lawsuit. The trial court agreed and dismissed the lawsuit before it with prejudice, but it did not dismiss with prejudice the contractor’s claim. In other words, the contractor could file a NEW lawsuit that relied on the final contractor’s payment affidavit, provided the contractor’s statute of limitations had not expired. Although the contractor appealed, the appellate court affirmed the trial court’s ruling:

Here, the exhibits [final contractor’s payment affidavit] unequivocally established that [the contractor] did not deliver the final contractor’s affidavit to the Association prior to filing suit, a condition precedent to a breach of contract claim for failure to tender final payment under the Construction Agreement. As such, we find the trial court properly dismissed the claim before it and noted that a future claim would not be barred, as dismissal with prejudice was only as to the lawsuit before it but not the actual claim. The dismissal with prejudice of a prematurely filed claim does not bar a subsequent claim once the claim has ripened.

Age of Empire, supra, at *1 (internal quotation and citation omitted).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

ASSERT A PARTY’S NONCOMPLIANCE OF CONDITIONS PRECEDENT WITH PARTICULARITY

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shutterstock_404314786Construction contracts oftentimes and should contain conditions precedent to payment.  Conditions precedent apply to both progress payments and final payment.  The conditions precedent operate such that payment is NOT due until the conditions are satisfied.  The satisfaction of the conditions precedent triggers the payor’s obligation to pay.

 

If a dispute arises due to the payee’s noncompliance with conditions precedent to payment, the noncompliance should be asserted with particularity in the answer and affirmative defenses.  For example, if a subcontractor was required to provide lien waivers and releases as a condition precedent to payment, then this should be asserted with particularity as an affirmative defense.  If the contractor’s receipt of payment from the owner was a condition precedent to payment to the subcontractor (pay-when-paid), then this should be asserted with particularity as an affirmative defense. Any noncompliance with a condition precedent should be identified as an affirmative defense.

 

An example of not pleading failure to comply with conditions precedent with particularity can be found in the recent case of Don Facciobene, Inc. v. Hough Roofing, Inc., 42 Fla. L. Weekly D1627a (Fla. 5th DCA 2017). 

 

In this case, the contractor hired a roofer for a relatively quick job. The roofer started its work without a formalized subcontract (not uncommon).  A subcontract was finally executed between the roofer and contractor when the roofer was virtually complete with its entire scope of work.  The contract required conditions precedent to payment.  The contractor did not pay the roofer due to the roofer’s failure to comply with the conditions precedent to payment and, then, certain offsets associated with alleged defective work.

 

The roofer initially claimed that the conditions precedent should not apply to work it performed and payments owed prior to the execution of the subcontract.  The court dismissed this argument claiming that the subcontract applied retroactively (e.g., prior to the date the subcontractor started working) since the subcontract contained a merger clause.  (Perhaps the parties could have even back-dated the subcontract which is not uncommon, e.g., “this subcontract is made and entered as of _______ [date]” even though it is signed after that date.)  Nevertheless, the Fifth District held that the contractor failed to properly preserve its defense that the roofer failed to comply with conditions precedent because its affirmative defense stated that the roofer “failed to allege, nor can it establish that it met each and every condition precedent to recovering payment in this cause pursuant to its Complaint.”  Because the contractor failed to allege with particularity which conditions precedent the roofer did not comply with or how the roofer failed to comply with them, the contractor failed to preserve its right to demand proof that the roofer satisfied conditions precedent to progress payments and final payment.

 

My guess is that it was apparent, and I mean apparent, that the contractor was relying on contractual conditions precedent.  It is also unclear if the contractor recited the word “contractual” in this affirmative defense whether that would have been sufficient or the court specifically wanted the contractor to recite each and every condition precedent the roofer did not satisfy.  Probably the latter.  My guess is this issue was also fleshed out in written discovery, a deposition, or even at trial, meaning there was no surprise since the contractor had an affirmative defense on point.  Regardless of whether this was a meritorious defense, the court was a stickler regarding the requirement to identify the noncompliance of the occurrence of conditions precedent.

 

Remember, when asserting a payee’s noncompliance with conditions precedent, identify the noncompliance with particularity!  Do not generalize the defense!

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.