Summary of Moore Brothers Co. v. Brown & Root, Inc. (2000)
Facts: P’s were subcontractors contracted by D general contractor to help build parts of road for a toll road. The subcontracts between Brown & Root and plaintiffs contain a general “pay when paid” clause, which said in part, payment by Owner to General Contractor is a condition precedent to any obligation of General Contractor to make payment to subcontractor, and the General Contractor shall have no obligation to make payment to Subcontractor for any portion of work for which General Contractor has not received payment from the Owner. The contract also contained provision for additional payment if the Owners ordered design changes that constitute “change in scope." The P was asked to make a thicker payment, and they did so which cost them more. An arbitrator ordered the Owner to pay D more, who would then pay P more. Owner did not have the funds to get more money because the lenders were not made aware that it would be possible that more funds would be needed, partly because of the acts of the D. P sued to recover this additional money; Ruling for P, appealed by D.
Issue: Whether D may rely on the non-occurrence of a valid “pay when paid” condition precedent in the subcontract as a defense to liability where the general contractor was partly responsible for the failure of the condition precedent.
Issue: Whether D is liable to P’s for payment for the additional “change in scope" work.
Holding: NO; YES; AFFIRMED FOR P.
Rationale: Brown & Root contributed to the non-occurrence of the condition precedent, thus the district court applied the “prevention doctrine” to waive the condition precedent and held that Brown & Root is liable to the plaintiffs for payment for the additional “change in scope” work notwithstanding the “pay when paid” clause in the subcontract. The prevention doctrine is a principle of contract law to which if a promisor prevents or hinders fulfillment of a condition to his performance, the condition may be waived or excused. See Restatement (Second) of Contracts § 245. The court found that D misled the lenders regarding expectations that potentially costly design changes would occur, which made it less likely that the lenders would provide additional financing to cover the cost of the design changes.
–Note: the court reversed the second claim which discussed that whether the nonfufillment of the pay-when-paid condition was a defense to the change in scope claims. The court ruled for the D saying that the trial court had no reasonable basis for concluding that D’s action necessarily contributed to owners failure to pay D for change in scope.