[No. 4, September Term, 1960.

]
Court of Appeals of Maryland

K G Construction Co. v. Harris

223 Md. 305 (Md. 1960) • 164 A.2d 451
Decided Oct 24, 1960

[No. 4, September Term, 1960.] had awarded the contractor a verdict in that
306 amount in this suit. The contractor *306 had
Decided October 24, 1960.
refused to pay the monthly payment unless the
CONTRACTS — Presumption That Mutual subcontractor paid him for the damage to the
Promises Are Dependent But Intention Of Parties house. This, the subcontractor had refused to do.
Controls — Promises In Excavating Contract Held The subcontractor continued to work for about a
Dependent. The modern rule is that there is a month after the date of the refusal of the monthly
presumption that mutual promises in a contract are payment and then quit. The contractor had later
dependent and are to be so regarded, whenever requested the subcontractor to complete the work
possible. While the courts assume, in deciding the but the subcontractor refused to do so. In a second
relation of one or more promises in a contract to count, the contractor sought to recover $450 which
one or more counter-promises, that the promises it had been required to pay another subcontractor
are dependent rather than independent, the for completing the job of excavating. The
intention of the parties, as shown by the entire subcontractor filed a counterclaim in which he
contract as construed in the light of the sought to recover $2,824.50, $1,484.50 of which
circumstances of the case, the nature of the was for the work which was done and $1,340 of
contract, the relation of the parties thereto, and the which was for a profit which it would have made
other evidence which is admissible to assist the if it had completed the contract. The trial court
court in determining the intention of the parties, is found for the subcontractor in the amount of
the controlling factor in deciding whether the $2,824.50 and the Court of Appeals reversed and
promises and counter-promises are dependent or entered a judgment for the contractor against the
independent. In the contract involved in the instant subcontractor for $450. In its opinion, the Court
case, between a contractor on a construction job stated that the promises and counter-promises
and a subcontractor, the latter agreed to do the were mutually dependent, that is to say, the parties
excavation and earth-moving work on the project intended performance by one to be conditioned on
in "a workmanlike manner, and in accordance with performance by the other and the subcontractor's
the best practices." and the contractor agreed to promise was, by explicit wording of the contract,
pay the subcontractor in monthly payments. Just precedent to the promise of payment, monthly, by
prior to the date when one of these payments the contractor; that, when the subcontractor's
became due, a bulldozer operator employed by the employee damaged the contractor's wall, this
subcontractor drove the bulldozer too close to the constituted a breach of the subcontractor's promise
contractor's house, causing the immediate collapse to perform his work in a "workmanlike manner
of a wall and other damage to the house. The and in accordance with the best practices."; that it
resulting damage to the house was $3,400, which
the subcontractor refused to pay until after a jury

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 K G Construction Co. v. Harris 164 A.2d 451 (Md. 1960)

was a material breach; and that the subcontractor the terms of the contract, was due the
again breached the contract when he discontinued subcontractor, unless the negligent performance of
work on the project. pp. 307-316 his work excused its payment?

Decided October 24, 1960. The appeal is presented on a case stated in

accordance with Maryland Rule 826 g.
Appeal from the Circuit Court for Prince George's
County (FLETCHER, J.). The statement, in relevant part, is as follows:

Suit to recover damages for breach of contract by ***

K G Construction Company against Glendal W.
"K G Construction Company, Inc.
Harris and Arthur E. Brooks. From a judgment for
(hereinafter called Contractor), plaintiff
defendants on their counterclaim, the plaintiff
and counter-defendant in the Circuit Court
appealed.
and appellant herein, was owner and
Judgment against the appellant reversed; and general contractor of a housing subdivision
judgment entered in favor of the appellant against project being constructed (herein called
the appellees for $450, the appellees to pay the Project). Harris and Brooks (hereinafter
307 costs. *307 called Subcontractor), defendants and
counter-plaintiffs in the Circuit Court and
The cause was argued before BRUNE, C.J., and
appellees herein, entered into a contract
HENDERSON, HAMMOND, PRESCOTT and
with Contractor to do excavating and
HORNEY, JJ.
earth-moving work on the Project.
Frank P. Flury, for appellant. Pertinent parts of the contract are set forth
below:
Leonard S. Blondes, for appellees.
308 *308

PRESCOTT, J., delivered the opinion of the

"Section 3. The Subcontractor agrees to
Court.
complete the several portions and the
Feeling aggrieved by the action of the trial judge whole of the work herein sublet by the
of the Circuit Court for Prince George's County, time or times following:
sitting without a jury, in finding a judgment
`(a) Without delay, as called for by the
against it in favor of a subcontractor,1 the
Contractor.
appellant, the general contractor on a construction
project, appealed. `(b) It is expressly agreed that time is of
the essence of this contract, and that the
1 There are two appellees; the statement of
Contractor will have the right to terminate
the case refers to them as "subcontractor."
this contract and employ a substitute to
We shall do likewise.
perform the work in the event of delay on
The principal question presented is: Does a the part of Subcontractor, and
contractor, damaged by a subcontractor's failure to Subcontractor agrees to indemnify the
perform a portion of his work in a workmanlike Contractor for any loss sustained thereby,
manner, have a right, under the circumstances of provided, however, that nothing in this
this case, to withhold, in partial satisfaction of said paragraph shall be construed to deprive
damages, an installment payment, which, under Contractor of any rights or remedies it
would otherwise have as to damage for
delay.

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 K G Construction Co. v. Harris 164 A.2d 451 (Md. 1960)

`Section 4. (b) Progress payments will be "While in the course of his employment by
made each month during the performance the Subcontractor on the Project, a
of the work. Subcontractor will submit to bulldozer operator drove his machine too
Contractor, by the 25th of each month, a close to Contractor's house while grading
requisition for work performed during the the yard, causing the immediate collapse
preceding month. Contractor will pay these of a wall and other damage to the house.
requisitions, less a retainer equal to ten per The resulting damage to contractor's house
cent (10%), by the 10th of the months in was $3,400.00. Subcontractor had
which such requisitions are received.2 complied with the insurance provision
(Sec. 9) of the aforesaid contract.
2 This section is not a model for clarity.
Subcontractor reported said damages to
`(c) No payments will be made under this their liability insurance carrier. The
contract until the insurance requirements Subcontractor and its insurance carrier
of Sec. 9 hereof have been complied with. refused to repair damage or compensate
Contractor for damage to the house,
`Section 5. The Contractor agrees — claiming that there was no liability on the
`(1) That no claim for services rendered or part of the Subcontractor.
materials furnished by the Contractor to "Contractor gave no written notice to
the Subcontractor shall be valid unless Subcontractor for any services rendered or
written notice thereof is given by the materials furnished by the Contractor to
Contractor to the Subcontractor during the the Subcontractor.
first ten days of the calendar month
following that in which the claim ***
originated.
"Contractor was generally satisfied with
*** Subcontractor's work and progress as
required under Sections 3 and 8 of the
`Section 8. * * * All work shall be contract until September 12, 1958, with the
performed in a workmanlike manner, and exception of the bulldozer accident of
in accordance with the best practices. August 9, 1958.
309 *309

`Section 9. Subcontractor agrees to carry,

during the progress of the work, * * *
liability insurance against * * * property
damage, in such amounts and with such
companies as may be satisfactory to
Contractor and shall provide Contractor
with certificates showing the same to be in
force.'

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 K G Construction Co. v. Harris 164 A.2d 451 (Md. 1960)

"Subcontractor performed work under the "It was stipulated that Subcontractor had
contract during July, 1958, for which it completed work on the Project under the
submitted a requisition by the 25th of July, contract for which they had not been paid
as required by the contract, for work done in the amount of $1,484.50 and that if they
prior to the 25th of July, payable under the had completed the remaining work to be
terms of the contract by Contractor on or done under the contract, they would have
before August 10, 1958. Contractor was made a profit of $1,340.00 on the
current as to payments due under all remaining uncompleted portion of the
preceding monthly requisitions from contract. It was further stipulated that it
Subcontractor. The aforesaid bulldozer cost the Contractor $450.00 above the
accident damaging Contractor's house contract price to have another excavating
occurred on August 9, 1958. Contractor contractor complete the remaining work
refused to pay Subcontractor's requisition required under the contract. It was the
310 due on August 10, *310 1958, because the opinion of the Court that if judgment were
bulldozer damage to Contractor's house in favor of the Subcontractor, it should be
had not been repaired or paid for. for the total amount of $2,824.50.
Subcontractor continued to work on the
project until the 12th of September, 1958,
at which time they discontinued working
on the project because of Contractor's
refusal to pay the said work requisition and
notified Contractor by registered letters of
their position and willingness to return to
the job, but only upon payment. At that
time, September 12, 1958, the value of the
work completed by Subcontractor on the
project for which they had not been paid
was $1,484.50.

"Contractor later requested Subcontractor

to return and complete work on the Project
which Subcontractor refused to do because
of nonpayment of work requisitions of July
25 and thereafter. Contractor's house was
not repaired by Subcontractor nor
compensation paid for the damage.

4
 K G Construction Co. v. Harris 164 A.2d 451 (Md. 1960)

"* * * Contractor filed suit against the contract and thereby released him (the
Subcontractor in two counts: (1), for the subcontractor) from any further obligation to
aforesaid bulldozer damage to Contractor's perform. The contractor, on the other hand, argues
house, alleging negligence of the that the failure of the subcontractor to perform his
Subcontractor's bulldozer operator, and (2) work in a workmanlike manner constituted a
for the $450.00 costs above the contract material breach of the contract, which justified his
price in having another excavating refusal to make the August 10 payment; and, as
subcontractor complete the uncompleted 312 there was *312 no breach on his part, the
work in the contract. Subcontractor filed a subcontractor had no right to cease performance
counterclaim for recovery of work of the on September 12, and his refusal to continue work
311 value *311 of $1,484.50 for which they had on the project constituted another breach, which
not received payment and for loss of rendered him liable to the contractor for damages.
anticipated profits on uncompleted portion The vital question, more tersely stated, remains:
of work in the amount of $1,340.00. By Did the contractor have a right, under the
agreement of the parties, the first count of circumstances, to refuse to make the progress
Contractor's claim, i.e., for aforesaid payment due on August 10, 1958?
bulldozer damage to Contractor's house, 3 The statement of the case does not show
was submitted to jury who found in favor
the exact terms concerning the
of Contractor in the amount of $3,400.00. remuneration to be paid the subcontractor.
Following the finding by the jury, the It does not disclose whether he was to be
second count of the Contractor's claim and paid a total lump sum, by the cubic yard,
the counterclaims of the Subcontractor, by by the day, or in some other manner. It
agreement of the parties, were submitted to does state that the excavation finally cost
the Court for determination, without jury. the contractor $450 more than the "contract
All of the facts recited herein above were price."
stipulated to by the parties to the Court.
The answer involves interesting and important
Circuit Court Judge Fletcher found for
principles of contract law. Promises and counter-
counter-plaintiff Subcontractor in the
promises made by the respective parties to a
amount of $2,824.50 from which
contract have certain relations to one another,
Contractor has entered this appeal."
which determine many of the rights and liabilities
The $3,400 judgment has been paid. of the parties. Broadly speaking, they are (1)
independent of each other, or (2) mutually
It is immediately apparent that our decision turns
dependent, one upon the other. They are
upon the respective rights and liabilities of the
independent of each other if the parties intend that
parties under that portion of their contract
performance by each of them is in no way
whereby the subcontractor agreed to do the
conditioned upon performance by the other. 5
excavating and earth-moving work in "a
Page, The Law of Contracts, ¶ 2971. In other
workmanlike manner, and in accordance with the
words, the parties exchange promises for
best practices," with time being of the essence of
promises, not the performance of promises for the
the contract, and the contractor agreed to make
performance of promises. 3 Williston, Contracts
progress payments therefor on the 10th day of the
(Rev. Ed.), ¶ 813, n. 6. A failure to perform an
months following the performance of the work by
independent promise does not excuse non-
the subcontractor.3 The subcontractor contends, of
performance on the part of the adversary party, but
course, that when the contractor failed to make the each is required to perform his promise, and, if
payment due on August 10, 1958, he breached his one does not perform, he is liable to the adversary

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 K G Construction Co. v. Harris 164 A.2d 451 (Md. 1960)

party for such nonperformance. (Of course, if performance of one covenant might be dependent
litigation ensues questions of setoff or recoupment on prior performance of another, although the
frequently arise.) Promises are mutually dependent contract contained no express condition to that
if the parties intend performance by one to be effect. Page, op. cit., ¶ 2946; Williston, op. cit., ¶
conditioned upon performance by the other, and, if 817. The modern rule, which seems to be of
they be mutually dependent, they may be (a) almost universal application, is that there is a
precedent, i.e., a promise that is to be performed presumption that mutual promises in a contract are
before a corresponding promise on the part of the dependent and are to be so regarded, whenever
adversary party is to be performed, (b) subsequent, possible. Page, op. cit., ¶ 2946; Restatement,
i.e., a corresponding promise that is not to be Contracts, ¶ 266. Cf. Williston, op. cit., ¶ 812.
performed until the other party to the contract has
While the courts assume, in deciding the relation
performed a precedent covenant, or (c) concurrent,
of one or more promises in a contract to one or
i.e., promises that are to be performed at the same
more counter-promises, that the promises are
time by each of the parties, who are respectively
dependent rather than independent, the intention
bound to perform each. Page, op. cit., ¶¶ 2941,
of the parties, as shown by the entire contract as
2951, 2961.
construed in the light of the circumstances of the
Professor Page, op. cit., ¶ 2971, says there are case, the nature of the contract, the relation of the
three classes of independent promises left: (1) parties thereto, and the other evidence which is
those in which the acts to be performed by the admissible to assist the court in determining the
313 respective parties are, by the terms of the *313 intention of the parties, is the controlling factor in
contract, to be performed at fixed times or on the deciding whether the promises and counter-
happening of certain events which do not bear any promises are dependent or independent. Page, op.
relation to one another; (2) those in which the cit., ¶ 2948; Williston, op. cit., ¶ 824. Pollak v.
covenant in question is independent because it Brush Electric Ass'n, 128 U.S. 446; Bryne v.
does not form the entire consideration for the 314 Dorey (Mass.), 109 N.E. 146; Rosenthal *314
covenants on the part of the adversary party, and Paper Co. v. Nat'l Folding Box Paper Co. (N.Y.),
ordinarily forms but a minor part of such 123 N.E. 766. Restatement, Contracts, ¶¶ 258,
consideration; and (3) those in which the contract 261.4
shows that the parties intended performance of
4 For a discussion of Sergeant Williams' note
their respective promises without regard to
to the case of Pordage v. Cole, 1 Wms.
performance on the part of the adversary, thus
Saunders 319, relating to the construction
relying upon the promises and not the to be given promises and counter-promises,
performances (Cf. Brown v. Fraley, 222 Md. 480, see Williston, op. cit., ¶¶ 819, 820, 821,
161 A.2d 128). 822; Page, op. cit., ¶ 2947.

In the early days, it was settled law that covenants Considering the presumption that promises and
and mutual promises in a contract were prima counter-promises are dependent and the statement
facie independent, and that they were to be so of the case, we have no hesitation in holding that
construed in the absence of language in the the promise and counter-promise under
contract clearly showing that they were intended consideration here were mutually dependent, that
to be dependent. Williston, op. cit., ¶ 816; Page, is to say, the parties intended performance by one
op. cit., ¶¶ 2944, 2945. In the case of Kingston v. to be conditioned on performance by the other;
Preston, 2 Doug. 689, decided in 1774, Lord and the subcontractor's promise was, by the
Mansfield, contrary to three centuries of opposing explicit wording of the contract, precedent to the
precedents, changed the rule, and decided that promise of payment, monthly, by the contractor. In

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 K G Construction Co. v. Harris 164 A.2d 451 (Md. 1960)

Shapiro Eng. Corp. v. Francis O. Day Co., 215 that refusal. His abandonment of the work will
Md. 373, 380, 137 A.2d 695, we stated that it is itself be a wrongful repudiation that goes to the
the general rule that where a total price for work is essence, even if the defects in performance did
fixed by a contract, the work is not rendered not." See also Restatement, Contracts, ¶ 274; F.H.
divisible by progress payments. It would, indeed, McGraw Co. v. Sherman Plastering Co., 60 F.
present an unusual situation if we were to hold Supp. 504, 512 (D.C.Conn.), aff. 149 F.2d 301; De
that a building contractor, who has obtained Forest Radio Tel. Tel. Co. v. Triangle Radio Supply
someone to do work for him and has agreed to pay Co., Inc. (Ct. App. N.Y.), 153 N.E. 75; Lander v.
each month for the work performed in the Samuel Heller Leather Co. (Sup. Jud. Court of
previous month, has to continue the monthly Mass.), 50 N.E.2d 962; Norwood Paper Co. v.
payments, irrespective of the degree of skill and Columbia Paper Bag Co. (C.A. 4th), 185 Fed.
care displayed in the performance of work, and his 454; Nathan B. Bradley v. Andrew T. King, 44 Ill.
only recourse is by way of suit for ill- 339, and compare Williston, op. cit., ¶¶ 805, 841
performance. If this were the law, it is and 842. Professor Corbin, in ¶ 954, states further:
conceivable, in fact, probable, that many "The unexcused failure of a contractor to render a
contractors would become insolvent before they promised performance when it is due is always a
were able to complete their contracts. As was breach of contract * * *. Such failure may be of
stated by the Court in Measures Brothers Ltd. v. such great importance as to constitute what has
Measures, 2 Ch. 248, 262 [1910]: "Covenants are been called herein a `total' breach. * * *. For a
to be construed as dependent or independent failure of performance constituting such a `total'
according to the intention of the parties and the breach, an action for remedies that are appropriate
good sense of the case." thereto is at once maintainable. Yet the injured
party is not required to bring such an action. He
We hold that when the subcontractor's employee
has the option of treating the nonperformance as a
negligently damaged the contractor's wall, this
`partial' breach only * * *." In permitting the
constituted a breach of the subcontractor's promise
subcontractor to proceed with work on the project
to perform his work in a "workmanlike manner,
after August 9, the contractor, obviously, treated
and in accordance with the best practices." Gaybis
the breach by the subcontractor as a partial one.
v. Palm, 201 Md. 78, 85, 93 A.2d 269; Johnson v.
As the promises were mutually dependent and the
Metcalfe, 209 Md. 537, 544, 121 A.2d 825; 17
subcontractor had made a material breach in his
C.J.S. Contracts, ¶ 515; Weiss v. Sheet Metal
performance, this justified the contractor in
Fabricators, 206 Md. 195. 203, 110 A.2d 671.
refusing to make the August 10 payment; hence,
315 And there can be little doubt that the breach *315
as the contractor was not in default, the
was material: the damage to the wall amounted to
subcontractor again breached the contract when
more than double the payment due on August 10.
he, on September 12, discontinued work on the
Speed v. Bailey, 153 Md. 655, 661, 662, 139 A.
project, which rendered him liable (by the express
534. 3 A Corbin, Contracts, ¶ 708, says: "The
316 terms *316 of the contract) to the contractor for his
failure of a contractor's [in our case, the
increased cost in having the excavating done — a
subcontractor's] performance to constitute
stipulated amount of $450. Cf. Keystone Eng.
`substantial' performance may justify the owner
Corp. v. Sutter, 196 Md. 620, 628, 78 A.2d 191.
[in our case, the contractor] in refusing to make a
progress payment * * *. * * * If the refusal to pay The appellees suggest two minor points that may
an installment is justified on the owner's be disposed of rather summarily. They argue that
[contractor's] part, the contractor [subcontractor] the contractor "gave no written notice to
is not justified in abandoning work by reason of subcontractor for any services rendered or

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 K G Construction Co. v. Harris 164 A.2d 451 (Md. 1960)

materials furnished by the contractor to the

subcontractor," in accordance with the terms of the
contract. It is apparent that the contractor's claim
against the subcontractor for ill-performance did
not involve, in any way, "services rendered or
materials furnished" by the contractor; hence, the
argument has no substance. They also contend that
the contractor had no right to refuse the August 10
payment, because the subcontractor had furnished
the insurance against property damage, as called
for in the contract. There is little, or no, merit in
this suggestion. The subcontractor and his
insurance company denied liability. The furnishing
of the insurance by him did not constitute a license
to perform his work in a careless, negligent, or
unworkmanlike manner; and its acceptance by the
contractor did not preclude his assertion of a claim
for unworkmanlike performance directly against
the subcontractor.

Judgment against the appellant reversed; and

judgment entered in favor of the appellant against
the appellees for $450, the appellees to pay the
costs.