McKenna v. Vernon
258 Pa. 18 (1917)
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Rule of Law:
A party to a contract who repeatedly ignores a condition precedent established for their own benefit, such as requiring an architect's certificate for payment, has waived the right to enforce that condition for a final payment, especially when the other party has rendered substantial performance.
Facts:
- On January 20, 1914, a plaintiff-contractor and a defendant-owner entered into a written agreement for the construction of a movie theatre.
- The contract stipulated that all payments to the contractor were contingent upon receiving certificates from the project's architect.
- A supplemental agreement on March 24, 1914, expanded the project and maintained the same payment conditions.
- As the work progressed, the owner made seven partial payments to the contractor, totaling $6,000.
- With a single exception, the owner made these progress payments without asking for or receiving the contractually required architect's certificates.
- Upon completion of the work, the owner refused to pay the remaining balance of $2,750.
Procedural Posture:
- The plaintiff-contractor filed an action in a court of first instance to recover the final balance due on the building contract.
- The case was tried, and the verdict was for the plaintiff-contractor in the amount of $2,500.
- At the conclusion of the trial, the defendant-owner moved for a compulsory nonsuit, which the trial court refused.
- The defendant-owner (appellant) appealed the trial court's judgment to the state's highest court.
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Issue:
Does a property owner waive the contractual requirement for an architect's certificate as a condition for final payment by repeatedly making progress payments without demanding such certificates throughout the project?
Opinions:
Majority - Mr. Justice Stewart
Yes, an owner waives the right to demand an architect's certificate for final payment by repeatedly failing to require one for prior progress payments. The court reasoned that the provision requiring an architect's certificate is intended for the benefit and protection of the owner. When the owner constantly and repeatedly disregards this provision during the course of the contract, they cannot later insist upon its strict enforcement to defeat a claim for final payment. This constant disregard constitutes a waiver. The court found it would be unjust to allow the owner to enforce the condition at the very end, especially since the owner observed the work daily without complaint and the architect testified that the contractor had substantially performed the contract and that a certificate would have been issued if requested.
Analysis:
This decision solidifies the contract law doctrine of waiver by conduct, demonstrating that a party's actions throughout the performance of a contract can be more legally significant than the strict written terms. It establishes that a contractual right can be implicitly relinquished if a party's behavior is inconsistent with an intent to enforce that right. This precedent limits the ability of a party to use a contractual technicality as a pretext for non-payment after having received the benefit of substantial performance, thereby promoting fairness and preventing opportunistic behavior in contractual disputes.
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