Hirschfeld Steel Co. v. Kellogg Brown & Root, Inc.
2006 WL 2345924, 2006 Tex. App. LEXIS 7152, 201 S.W.3d 272 (2006)
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Rule of Law:
For a contractual provision to be considered a condition precedent, the non-performance of which would excuse a party's obligations, the contract must contain specific conditional language (e.g., 'if,' 'provided that,' 'on condition that'). Absent such clear language, a provision will be construed as a covenant to prevent forfeiture of a party's rights.
Facts:
- The Harris County-Houston Sports Authority (Sports Authority) contracted with Kellogg Brown & Root, Inc. (Kellogg) to be the general contractor for the construction of Minute Maid Park.
- Kellogg subcontracted with Hirschfeld Steel Company, Inc. (Hirschfeld) to design and build the park's retractable roof system.
- As part of the subcontract, Hirschfeld was required to provide a ten-year warranty for the roof system.
- The subcontract also required Hirschfeld to specify and publish a ten-year written maintenance program for the roof mechanization system.
- A dispute arose over payments for first-year maintenance services on the roof.
- On September 22, 2000, Hirschfeld sent a letter to Kellogg stating it was 'suspending' its ten-year warranty, claiming the Sports Authority had failed to perform the required maintenance.
- Hirschfeld did not subsequently reinstate the warranty.
- Kellogg and the Sports Authority later entered into a settlement agreement in which Kellogg affirmed that the ten-year warranty was in full force and effect.
Procedural Posture:
- Hirschfeld Steel Company, Inc. sued Kellogg Brown & Root, Inc. and the Harris County-Houston Sports Authority in a Texas trial court.
- Hirschfeld sought damages for breach of contract and a declaratory judgment that its ten-year warranty was void.
- Kellogg asserted a counterclaim for breach of contract and for declaratory relief.
- The trial court granted summary judgment in favor of Kellogg and the Sports Authority, dismissing Hirschfeld's declaratory judgment claims regarding the warranty.
- The remaining contract claims were tried before a jury, which found that Hirschfeld did not substantially perform its duties under the subcontract.
- The trial court entered a final judgment that both Hirschfeld and Kellogg take nothing on their respective claims.
- Hirschfeld appealed the judgment to the Texas Court of Appeals, and Kellogg filed a cross-appeal concerning its request for attorney's fees.
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Issue:
Does the performance of a written maintenance program constitute a condition precedent to the existence of a ten-year warranty when the subcontract does not contain specific conditional language such as 'if,' 'provided that,' or 'on condition that'?
Opinions:
Majority - Justice Kem Thompson Frost
No, the performance of the written maintenance program does not constitute a condition precedent to the existence of the ten-year warranty. Because of their harshness in operation, conditions precedent are disfavored in the law and will not be found unless the contract uses specific conditional language. To make performance conditional, terms such as 'if,' 'provided that,' or 'on condition that' must typically be included. The subcontract here contained no such language regarding the maintenance program. The single use of the word 'condition' in the relevant section was used in a general sense, meaning a 'term' or 'provision,' not as a condition precedent that would void the entire warranty based on a failure to perform maintenance. Interpreting the maintenance plan as a condition precedent would lead to forfeiture, which courts avoid whenever another reasonable reading of the contract is possible.
Analysis:
This decision reinforces the high bar for establishing a condition precedent in Texas contract law, emphasizing that courts will avoid interpretations leading to forfeiture unless the parties' intent is unmistakably clear. It solidifies the principle that the absence of specific conditional phrases is strong evidence against the existence of a condition precedent. The ruling protects substantial contractual obligations, like a major warranty, from being voided by a party's failure to perform related, but not explicitly conditional, covenants. Consequently, contracting parties seeking to make an obligation conditional must use unambiguous language to ensure their intent is legally enforceable.
