Haymore v. Levinson

Supreme Court of Utah · Contracts

Contractssatisfaction clausesbuilding contractssatisfactory completionobjective satisfactionsubjective satisfactionbuilding contractworkmanlike manner

Facts

Haymore, a contractor, was building a house when the Levinsons agreed in November 1955 to buy it for $36,000, with $3,000 of the price placed in escrow until "satisfactory completion of the work" listed in an attachment to the contract. After moving in, the Levinsons refused to release the escrow, claiming they were not satisfied with certain items, and later demanded additional work beyond a second list Haymore had agreed to address. When Haymore and his workman came to perform that work, the Levinsons demanded still further work and ordered him off the property when he refused. The trial court found the original list had been completed satisfactorily except for minor deficiencies worth $261, allowed that offset, and found no structural defects.

Issue

Does the contract phrase "satisfactory completion of the work" in a house-sale/building contract give the buyers a purely subjective right to withhold payment until personally satisfied, or does it require only completion that meets an objective standard of reasonableness? Also, can the buyers rely on incomplete performance of later-requested items after they prevented the builder from continuing the work?

Rule

Contracts requiring performance to another party's satisfaction fall into two classes. If the performance primarily concerns personal taste, fancy, or sensibility, the favored party is ordinarily the sole judge of satisfaction; but if the performance concerns operative fitness, mechanical utility, or structural completion, an objective standard applies, and approval may not be withheld arbitrarily without reasonable justification. In building contracts, the work need only be completed in a reasonably skillful and workmanlike manner according to accepted local standards, such that reasonable and prudent persons would approve it; additionally, a party who prevents further performance cannot take advantage of the resulting nonperformance.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Boise, Nora Ellis hired Cedar Vale Builders to construct a detached workshop behind her home. Their contract provided that the final $18,000 would be paid upon Nora's "satisfactory completion" approval. After the job was finished, Nora admitted the workshop was structurally sound and complied with ordinary building practices, but said she simply did not feel satisfied with it.

Under the governing rule, which standard applies to Nora's refusal to approve the work?

Explanation. Building contracts generally fall into the class involving operative fitness, mechanical utility, or structural completion. For that class, approval may not be withheld arbitrarily; the question is whether the work was completed in a reasonably skillful and workmanlike manner under accepted local standards and would satisfy reasonable and prudent persons. (Derived from Haymore v. Levinson (n.d.).)