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Peacock Const. Co., Inc. v. Modern Air Conditioning, Inc. Case Brief

Summary of Peacock Const. Co., Inc. v. Modern Air Conditioning, Inc. (1977)

P: Builder/Contractor

D: Sub Contrator

Facts: D subcontractors entered into an agreement with P contractor to do work on a construction project. After D’s completed the work, P refused to make final payment contending that it had not received final payment from the owner. D’s initiated a breach of contract action and were granted summary judgment. P contended the parties' agreement provided that the owner's payment was a condition precedent to petitioner's duty to perform.

Issue: Whether P’s payment by the owner was intended to be a condition precedent to paying the subcontractors.

Holding: That intent in most cases is that payment by the owner to the general contractor is not a condition precedent to the general contractor's duty to pay the subcontractors.

Rationale: The parties' agreement was ambiguous regarding the payment provision, so that such ambiguity was resolved in D’s favor. D’s were small subcontractors who would usually not assume the risk that the owner would not pay them.  This is because small subcontractors, who must have payment for their work in order to remain in business, will not ordinarily assume the risk of the owner's failure to pay the general contractor. If the parties wanted to shift the burden of risk from P to D, the parties' agreement could have provided such provision.

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