Fay v. Moore
261 Pa. 437, 1918 Pa. LEXIS 760, 104 A. 686 (1918)
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Rule of Law:
A provision in a construction contract requiring an architect's certificate for final payment is excused if the architect's refusal to issue the certificate is capricious, fraudulent, or the result of collusion with the owner. In such cases, a contractor may recover payment by demonstrating substantial performance of the contract.
Facts:
- A contractor (Plaintiff) entered into an agreement with an owner, Moore (Defendant), for the erection of a building.
- The contract stipulated that payments would be made only upon the certificate of the architect.
- The specifications called for 'wood corner beads,' which the contractor installed. Moore, however, demanded a different, 'impractical' type of bead, and the architect complied with Moore's demand to reject the work.
- The architect also wrote letters acknowledging that Moore's desired corner beads were 'impractical as well as impossible' and that he was simply following Moore's instructions verbatim.
- The contractor used chestnut for window sashes instead of the specified white pine, allegedly based on the architect's verbal instruction to match the interior finish, which Moore was aware of.
- After the contractor claimed the work was complete, the architect refused to issue a final certificate, citing Moore's dissatisfaction.
- Moore then hired another contractor to perform additional work he deemed necessary to complete the contract.
Procedural Posture:
- The contractor (Plaintiff) sued the owner (Defendant) in a trial court to recover the balance due under a construction contract.
- The original plaintiff died during the lawsuit, and his wife was substituted as the administratrix of his estate.
- The case was tried three times.
- The third trial resulted in a verdict and judgment in favor of the Plaintiff.
- The Defendant (owner) appealed this judgment to the present court.
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Issue:
Does an architect's refusal to issue a required certificate of completion prevent a contractor from recovering payment if the refusal is based on the owner's dictation and bad-faith demands rather than the architect's impartial judgment?
Opinions:
Majority - Mr. Justice Frazer
No. A contractor is not barred from recovery when an architect withholds a certificate of completion due to collusion with the owner rather than an impartial assessment of the work. The contract provision requiring an architect's certificate is intended to protect the owner from unjust claims, not to be used as a tool for arbitrary refusal of payment. Evidence suggested the architect here condemned the work not based on his own judgment, but at the dictation and to satisfy the whim of the owner. Where refusal is capricious, fraudulent, or based on collusion, withholding the certificate does not prevent the contractor from recovering. Because there was also evidence of substantial performance and no willful departure from the contract's terms, the contractor could recover the amount due, less any costs to remedy minor defects.
Analysis:
This case reinforces the doctrine of substantial performance and establishes a critical good-faith exception to satisfaction clauses involving third-party arbiters like architects. It prevents owners from hiding behind an architect's authority to avoid payment, by allowing a jury to inquire into the basis of the architect's decision. The ruling ensures that an architect's role as a certifier must be exercised with impartial judgment; if that impartiality is compromised by the owner's collusion or bad faith, the certificate requirement can be waived. This precedent protects contractors from being held hostage by unreasonable clients who might otherwise use such clauses to unjustly withhold payment.
