Smith v. . Brady
17 N.Y. 173 (1858)
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Rule of Law:
A contractor must substantially perform the terms of a building contract, including any conditions precedent such as obtaining an architect's certificate, in order to recover payment. An owner's mere occupation and use of a building constructed on their land does not, by itself, constitute a waiver of the contractor's failure to perform.
Facts:
- A plaintiff builder entered into contracts with a defendant owner to construct three cottages on the defendant's property.
- The contracts contained detailed specifications, such as the required spacing for nailing joists and beams.
- The contracts also required the builder to obtain a certificate from the supervising architects confirming the work was completed before the final payment would be made.
- The builder constructed the cottages but failed to follow certain specifications, including placing joists and beams further apart than required.
- The builder never applied for or obtained the required completion certificate from the architects.
- After the cottages were built, the defendant took possession of them and appropriated them for his own use.
Procedural Posture:
- The plaintiff builder sued the defendant owner in a New York court of first instance for the final payment on building contracts.
- The case was heard by a referee, who found for the plaintiff, ruling he could recover the contract price less a deduction for the value of the defects.
- The defendant appealed the referee's decision to the Supreme Court of New York (an intermediate appellate court at the time), which affirmed the judgment.
- The defendant then appealed to the New York Court of Appeals, the state's highest court.
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Issue:
Does an owner's occupation of a building constructed on their land waive the condition precedent of the contractor's full performance, thereby allowing the contractor to sue for the contract price despite known deviations from the contract's specifications?
Opinions:
Majority - Harris, J.
No. An owner's occupation of a building does not automatically waive the contractual condition that a builder must perform according to the specifications to be entitled to payment. The parties agreed to make the architects' certificate a condition precedent to payment, and the plaintiff is bound by that term. The plaintiff cannot unilaterally withdraw the question of completion from the agreed-upon arbiters (the architects) and refer it to a court. Furthermore, the defendant was entitled to have the houses built precisely as described in the specifications, and it was an error for the lower court to admit testimony suggesting that a different construction was 'sufficiently strong.' The defendant contracted for a specific result and was not required to accept something else in its place.
Concurring - Comstock, J.
No. A contractor who has failed to substantially perform cannot recover on the contract by arguing the owner received a benefit. The doctrine allowing recovery for benefits received does not apply to building contracts where the owner is effectively forced to accept the work because it is annexed to their land. Unlike accepting a defective movable good, an owner of land cannot reject a building without abandoning their property. Therefore, the mere use and occupation of the building is not a voluntary waiver of the conditions of the contract. The law will not create a new contract for the parties or encourage contractors to violate their agreements; they must perform what they promised in order to be paid.
Analysis:
This decision firmly established the doctrine of substantial performance in New York contract law, particularly for construction cases. It holds that complete, perfect performance is not always required, but a contractor cannot recover on the contract if they have committed a material breach or intentionally deviated from the specifications. The court's crucial distinction between accepting defective chattel and occupying a flawed building on one's own land clarifies the limits of the 'waiver by acceptance' doctrine. This precedent protects property owners from being forced to pay for work that does not conform to their agreement and reinforces the principle that parties are entitled to the benefit of their bargain.
