Philadelphia Commerce Court Applies Basic Contract Principles in Entering Judgment for Subcontractor

In Carson Concrete Corp. v. Ernest Bock & Sons, Philadelphia Commerce Court Judge Gary S. Glazer reiterated basic contract law principles in issuing his Findings of Fact and Conclusions of Law. A copy of Judge Glazer’s Findings of Fact and Conclusions of Law can be found here.

Bock & Sons, as general contractor, subcontracted with Carson Concrete. The subcontract originally included a “pay-if-paid” provision. Under that original language, Bock & Sons only had to pay Carson Concrete if the owner paid Bock & Sons for the subcontracted work. The “pay-if-paid” provision was amended, however, to include hand-written words.

There was a lengthy delay on the project, through no fault of the subcontractor. After the delay, the subcontractor had to remobilize its workforce, equipment, and materials to complete the work, which was done in a satisfactory manner. Carson Concrete issued an invoice for additional work and permits arising because of factors involved in the delay. The owner rejected payment for these additional expenses, and Bock & Sons refused to pay per the “pay-if-paid” provision. There was no evidence that the owner actually rejected Carson Concrete’s work; rather, it simply refused to pay for that work.

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Carson Concrete sued Bock & Sons for breach of contract and violation of the Contractor and Subcontractor Payment Act (CSPA), among other things.

The court observed that “[i]n interpreting a contract, the ultimate goal is to ascertain and give effect to the intent of the parties as reasonably manifested by the language of their written agreement …. The task of interpreting a contract is generally performed by a court rather than by a jury. The goal of that task is … to ascertain the intent of the parties as manifested by the language of the written instrument….”

Further, “[w]here the language of a contract is clear and unambiguous, a court is required to give effect to that language …. [Conversely], [c]ontractual language is ambiguous if is it reasonably susceptible of different constructions and capable of being understood in more than one sense.” Judge Glazer added, “[t]his is not a question to be resolved in a vacuum. Rather, contractual terms are ambiguous if they are subject to more than one reasonable interpretation when applied to a particular set of facts.”

The pre-printed “pay-if-paid” language in the parties’ agreement was clear and unambiguous. If the owner failed to pay Bock & Sons for Carson Concrete’s work, Carson Concrete bore the risk of loss. However, this was not the end of the story. A hand-written amendment, added during negotiations, provided the “pay-if-paid” provision applied, “(ONLY IF WORK COMPLETE (SIC) BY CARSON … IS UNACCEPT (SIC) BY OWNER).”

The Commerce Court found the hand-written amendment equally clear and unambiguous. The parties intended to replace the “pay-if-paid” condition precedent with a new condition precedent, “namely, one that would excuse the General Contractor from paying the Subcontractor only if the Owner refused or failed to accept the ‘work,’ as completed by the Subcontractor.” Testimony from Bock & Sons reinforced the point that payment was required if the owner accepted the work.

Judge Glazer concluded the contract language made clear that Bock & Sons was only exempted from paying Carson Concrete if the owner rejected Carson Concrete’s work. “However, no evidence was offered at trial that the Owner had rejected the concrete work as completed by the Subcontractor.” Thus, Judge Glazer concluded Bock & Sons had breached its contractual obligations, and judgment was entered for Carson Concrete.