Carrig v. Gilbert-Varker Corp.
314 Mass. 351, 147 A.L.R. 927, 50 N.E.2d 59 (1943)
Rule of Law:
A contractor's definite refusal to perform a contract unless paid a higher price than agreed constitutes a present breach, not merely an anticipatory one. If a contract is divisible into distinct performance units, a breach of one unit does not preclude recovery for substantial performance of other completed units.
Facts:
- Carrig, the owner, entered into a contract with Gilbert-Varker Corporation, the contractor, for the construction of thirteen houses in Natick and thirty-five houses in Watertown.
- The Watertown contract specified various types of houses, basic prices for each, and a total basic price for thirty-five houses, with payments tied to completion stages of individual houses and secured by separate mortgages on each lot.
- Gilbert-Varker Corporation completed the thirteen Natick houses and twenty of the thirty-five Watertown houses according to the contract.
- On October 25, 1941, Carrig informed Gilbert, the president of Gilbert-Varker, of a bank's offer to lend $56,000 for the remaining fifteen Watertown lots.
- Gilbert responded that Gilbert-Varker would not build the remaining fifteen Watertown houses under the contract because it was losing money.
- On October 27, 1941, Gilbert definitively refused to continue building the Watertown houses at the contract prices and later sent Carrig new, higher prices for their construction.
- On February 10, 1942, Carrig notified Gilbert-Varker that he was ready to record and assign the construction mortgages for the fifteen houses, but Gilbert-Varker did not reply and did not build these houses.
Procedural Posture:
- Carrig (owner) initiated a first action against Gilbert-Varker Corporation (contractor) seeking damages related to the Natick and Watertown contracts.
- Gilbert-Varker Corporation (contractor) initiated a second action against Carrig (owner) seeking unpaid balances for work performed on the Natick and Watertown contracts.
- Both actions were referred to an auditor whose findings of fact were to be final.
- In Carrig's action, the auditor found for Gilbert-Varker on the Natick claim but for Carrig on the Watertown repudiation claim, awarding Carrig $9,935 plus interest.
- In Gilbert-Varker's action, the auditor found that Gilbert-Varker was owed $2,816.35 for the twenty Watertown houses but was not entitled to recover it due to repudiation of the remaining fifteen houses, and also found Gilbert-Varker was entitled to $2,859.64 plus interest for the Natick houses.
- The trial judge ordered judgment for Carrig for $9,935 plus interest in the first action.
- The trial judge ordered judgment for Gilbert-Varker for $2,859.64 plus interest (for Natick houses only) in the second action.
- Gilbert-Varker (contractor) appealed the judgment in the first action.
- Both Gilbert-Varker (contractor) and Carrig (owner) appealed the judgment in the second action.
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Issue:
Does a contractor's definite refusal to complete construction under a contract unless paid a higher price than agreed constitute a present breach, and if the contract is divisible into distinct units, does such a breach for a future unit preclude recovery for substantial performance of previously completed units?
Opinions:
Majority - Ronan, J.
Yes, a contractor's definite refusal to complete construction under a contract unless paid a higher price constitutes a present breach, and if the contract is divisible into distinct units, such a breach for a future unit does not preclude recovery for substantial performance of previously completed units. The court reasoned that Gilbert-Varker Corporation's unequivocal refusal to proceed with the Watertown contract unless paid a higher price, despite Carrig's readiness to assign mortgage proceeds, constituted a present breach of the contract. This was not merely an anticipatory breach because Carrig was ready and willing to perform his part, distinguishing it from cases like Daniels v. Newton where the other party's performance might not yet be required. The court found that Carrig was entitled to damages representing the excess cost he would incur to have the remaining fifteen houses built. Furthermore, the court held that the Watertown contract was divisible. The intention of the parties, as evidenced by the contract language, the manner of performance, and the method of payment, indicated that each of the thirty-five houses was treated as a separate unit. The contract assigned basic prices to each house, payments were made in installments as individual houses progressed, and financing involved separate mortgages for each lot. Therefore, Gilbert-Varker Corporation's breach regarding the fifteen unbuilt houses did not bar its recovery for the substantial performance of the twenty Watertown houses already completed or the Natick houses.
Analysis:
This case clarifies the distinction between an anticipatory breach and a present breach, emphasizing that an unequivocal refusal to perform unless new, more favorable terms are met, when the other party is ready to perform, constitutes an immediate breach. It reinforces the principle that a party cannot unilaterally renegotiate an existing contract by refusing to perform. The decision also provides a critical framework for determining contract divisibility, which allows for partial recovery even when a party breaches a larger agreement, thereby mitigating the harshness of the 'entire contract' rule in appropriate contexts and encouraging fair compensation for work already performed.
