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

353 So. 2d 840 (Fla. Sup. Ct. 1977)

Facts: Peacock Construction was the general contractor of a condominium project. Modern Air Conditioning subcontracted with Peacock to do the heating and air conditioning work and Overly Manufacturing subcontracted with Peacock to do the “rooftop swimming pool” work. In their written subcontracts Peacock agreed to make final payment to the Modern and Overly:

“Within 30 days after completion of the work included in this subcontract, written acceptance by the Architect and full payment therefore by the Owner.”

Both Modern and Overly completed the work specified in their contracts and requested final payment. Peacock refused to make the final payments so both Modern and Overly brought suit for breach of contract.

At trial, Peacock defended by pointing out that it had not yet received from the owner full payment for Modern and Overly’s work. [The owner had entered into bankruptcy proceedings]. Furthermore, they claimed that such a payment was a condition precedent and that the final payment provision and must be fulfilled before they were obliged to perform under the contract.

The trial court granted plaintiff’s motion for summary judgment. The orders of judgment interpreted the contract not to require payment by the owner as a condition precedent to Peacock’s duty to perform.

The Second Dist. Crt. of Appeals affirmed the lower court’s judgment on Modern’s appeal. Adopting the nation’s majority view that provisions of the kind disputed here do not set conditions precedent but rather constitute absolute promises to pay, fixing payment by the owner as a reasonable time for when the payment to the subcontractor is to be made. [Overly’s case eventually made its way to the Second Dist. Crt. and its judgment was affirmed based on Modern.]

Peacock urges the court to follow the Third Dist. Crt. of Appeals decision of Gerrits where the court held that these contractual provisions presented factual questions as to the party’s intent and should be decided by a jury.

Issue: Should the court determine the written intention of the parties as a matter of law and what interpretation should be given to these ambiguous contractual provisions?

Holding/Reasoning: Yes. In this case contractual ambiguities are interpreted as matters of law. Although it must be admitted that the meaning of language is a factual question, the general rule is that the interpretation of a document is a question of law rather than of fact.

The contract provision may be interpreted as setting a condition precedent or as fixing a reasonable time for payment. The intent in most cases is that the payment by the owner to the general contractor is not a condition precedent to the general contractor’s duty to pay the subcontractors. This is because small subcontractors, who must have payment in order to stay in business, will not generally assume the risk of the owner’s failure to pay the general contractor. And this is the reason for the majority view in this country. Gerrits is overruled to the extent it is inconsistent with this opinion. Second Dist. Crt. of Appeal AFFIRMED.

For more confusion, See Also: Restatement (Second) of Contracts §227