New Era Homes Corp. v. Forster

New York Court of Appeals · 1949 · Contracts

Contractsentire contractdivisible contractconstruction contractprogress paymentsinstallment paymentsbreachdamages

Facts

Plaintiff and defendants entered a written contract under which plaintiff would supply all labor and materials for alterations to defendants' home for a total price of $3,075, payable in four installments at specified stages of the work. Plaintiff began performance, partially completed the work, and received the first two payments. When rough carpentry and rough plumbing were completed, plaintiff demanded the third payment of $1,500; defendants refused, so plaintiff stopped work and sued for the unpaid balance, later limiting its demand at trial to $1,500. Plaintiff offered no proof of actual damages beyond its claim that completion of the rough work entitled it to the third installment.

Issue

Did the payment schedule make the contract divisible so that completion of rough carpentry and rough plumbing entitled plaintiff to recover the fixed third installment of $1,500 as such? Or was the agreement an entire contract under which the listed sums were only progress payments, limiting plaintiff on defendants' breach to recovery in quantum meruit or for actual contract damages?

Rule

When a construction agreement states a single total price for the whole project and lists sums due at stages of performance, the contract is entire rather than divisible unless the writing shows the parties intended separate parts of the work to have separate consideration. In such an entire contract, the listed sums are progress payments on the whole price, not fixed compensation for severable portions, and upon the owner's breach before completion the contractor may recover either in quantum meruit for work finished or in contract for the value of what was lost, measured by contract price less payments made and less cost of completion.

🔒

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 Albany, Nora Kim hired Beacon Hill Renovation Co. to remodel her attic and rear porch. The written agreement stated that Beacon Hill would furnish all labor and materials for the entire project for $52,000, payable $5,000 at signing, $17,000 when demolition and framing were complete, $20,000 when rough electrical and plumbing were complete, and $10,000 at final completion; after the rough work was finished, Nora refused to make the third payment.

If Beacon Hill sues claiming it is automatically entitled to the $20,000 because the contract says that amount is due when rough electrical and plumbing are complete, which is the best analysis?

Explanation. When the writing states one total price for all labor and materials on the whole project, and merely lists amounts due at stages of performance, the contract is entire unless the writing shows separate consideration for separate parts. The milestone amounts are progress payments on the whole price, not fixed compensation for those segments as such. Therefore completion of the rough work does not by itself entitle the contractor to recover that installment amount standing alone.