Holmes Brick & Salvage Co. v. Reo Construction, Inc.
253 So.2d 562, 1971 La. App. LEXIS 5709 (1971)
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Rule of Law:
A contract clause that allows one party to designate the time for performance does not create a suspensive condition allowing that party to avoid the obligation entirely, but rather establishes a term for performance when the underlying event is certain to occur in the future.
Facts:
- Reo Construction, Inc. (Reo) was hired as the general contractor to construct a new funeral home for the Wilberts.
- Holmes Demolition Service, Inc. (Holmes) provided an estimate to Reo for the demolition of two existing buildings on the property, making it clear that any contract must include both buildings as the value of salvaged materials was factored into the price.
- Holmes and Reo signed a two-phase contract: Phase 1 was for demolishing a small building for $1,500, and Phase 2 was for demolishing a large building for $4,000.
- The contract specified that Phase 2 would be performed 'At a time designated by you [Reo].'
- In both phases, the salvaged materials were to become the property of Holmes.
- Holmes successfully completed Phase 1 and received full payment.
- Reo never called upon Holmes to perform Phase 2 of the contract.
- Reo subsequently hired a different company to demolish the large building specified in Phase 2.
Procedural Posture:
- Holmes Demolition Service, Inc. sued Reo Construction, Inc. in the District Court (trial court) for breach of contract.
- Reo Construction failed to appear, and a default judgment was entered against it.
- Following a hearing to confirm the default, the trial court awarded Holmes $7,500 in damages, representing the contract price plus the estimated value of salvage materials.
- Reo Construction, as appellant, appealed the default judgment to the intermediate appellate court where Holmes is the appellee.
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Issue:
Does a contractual clause stating that performance will occur 'at a time designated by you' create a suspensive condition that allows the designating party to never request performance, or does it merely establish a term for the performance of an existing obligation?
Opinions:
Majority - Blanche, Judge
No. The clause 'at a time designated by you' constitutes a term for the performance of the contract, not a suspensive condition. The parties had a complete agreement where the event of demolition was certain to occur as part of the larger construction project; only the timing was uncertain. This clause did not give Reo the option to refrain from ever designating a time, but obligated it to call upon Holmes when the project's progress made the demolition necessary. By hiring another company to perform the demolition, Reo breached its contract with Holmes. However, the trial court erred in awarding damages equal to the full contract price plus the estimated value of salvage; the proper measure of damages is the profit Holmes was deprived of, which is the contract price plus salvage value minus the costs Holmes would have incurred.
Analysis:
This decision clarifies the critical distinction between a suspensive condition and a term for performance under Louisiana contract law. It establishes that when performance is a certain and necessary future part of a larger undertaking, a clause giving one party control over timing does not make the obligation optional. This precedent prevents parties from using timing clauses as a pretext to escape firm contractual commitments. Future cases involving similar language will likely interpret such clauses as setting a timeline for a mandatory obligation rather than creating a condition that may never be fulfilled.
