Lowy v. United Pacific Insurance

Supreme Court of California · 1967 · Contracts

Contractsseverable contractdivisible contractsubstantial performanceconstruction contractgrading contractstreet improvementsapportioned consideration

Facts

Plaintiffs, who owned and were subdividing land, contracted with defendant contractor to perform excavation and grading work and also street improvement work in a subdivision. The contract set a lump-sum price of $73,500 for grading work in Exhibit A and separate unit prices in Exhibit B for paving streets and installing curbs and gutters. After defendant completed about 98 percent of the grading work, a dispute arose over $7,200 for additional grading work caused by plaintiffs' plan changes that required imported fill dirt. Defendant stopped performance, plaintiffs hired others to perform street improvement work, and litigation followed.

Issue

Was the contract divisible so that defendant could recover for the grading phase despite not performing the street-improvement phase, and did the doctrine of substantial performance allow recovery for the grading work less credits for incomplete items? Plaintiffs also challenged whether they were entitled to an additional setoff for payments made after defendant stopped work.

Rule

A contract is divisible when the consideration is apportioned so that separate parts of performance are exchanged for corresponding separate payments. In a construction-type contract, a contractor who has substantially performed in good faith may recover the unpaid contract price less damages or credits for incomplete or defective performance, especially where full performance was prevented, excused, or delayed by the other party. A party may not obtain additional appellate relief on a damages theory not pursued in the trial court, and substantial evidence findings are binding on appeal.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

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

In San Diego, Elena Park hired Mesa Vista Earthworks under a single written agreement to perform two categories of subdivision work. The agreement set a fixed price of $180,000 for site grading and separately listed unit prices for later curb, gutter, and asphalt work to be measured after completion. After the grading was nearly complete, a payment dispute arose and Elena hired another firm to do the paving.

If Mesa Vista sues for the unpaid grading price, what is the strongest argument that it may recover even though it did not perform the paving work?

Explanation. The majority treated a single construction agreement as divisible where it separated the work into two phases and assigned different compensation methods to each. Apportioned consideration—here, a lump sum for grading and unit prices for later street work—supports treating each phase as a corresponding exchange. Thus, nonperformance of the paving phase would not automatically defeat recovery for the grading phase if that phase was substantially performed, subject to deductions.