By: M. Matthew Madden, Jr., Esq.
Construction contracts almost always contain condition precedents that must occur before a contract becomes effective or an obligation to perform arises. Under Massachusetts law, if the condition precedent is not fulfilled, the contract, or the obligations attached to the condition, are unenforceable. Thus, if condition precedents are not met in accordance with the contract, the right to claim is lost.
A recent summary judgment decision in Suffolk Superior Court in 399 Congress, LLC v. John Moriarity & Associates, Inc. (Docket No. 21-2297-BLS1) serves as a reminder that a party’s failure to satisfy conditions precedent can have serious legal and commercial consequences and may prevent an otherwise valid claim from being successful. By way of background, John Moriarity & Associates, Inc. (“JMA”) entered into a contract with 399 Congress, LLC (“399 Congress”), to serve as the general contractor for a large mixed-use project. As the project was not completed as initially scheduled, 399 Congress and JMA agreed to an amended contract that included a revised construction schedule with new milestones for completion. Despite the amendment, the project was not completed as scheduled, and 399 Congress filed suit to recover damages, including liquidated damages, for the alleged delay and incomplete work by JMA.
Following the completion of discovery, 399 Congress moved for summary judgment on its $3 million claim for liquidated damages under the amended contract. In support of its position, 399 Congress asserted that JMA did not meet the amended schedule and failed to give the required notice for an extension under the amended contract. While JMA did not contest those facts, it argued that 399 Congress failed to satisfy a condition precedent prior to seeking liquidated damages because it failed to mutually adjust the schedule due to unavoidable delay.
In denying the motion, the Court held that although the amended contract allowed 399 Congress to recover liquidated damages based on JMA’s failure to meet the schedule, it also required the parties to mutually adjust the schedule due to unavoidable delay. Specifically, the Court determined that through the amended contract, 399 Congress “acknowledge[d]” that the “schedule shall be mutually adjusted in the event of any unavoidable delay (including changes in the work directed by [399 Congress] or delayed delivery of [399 Congress] provided materials), prior to [JMA] being subject to any of the liquidated damages provisions.” The Court found that the foregoing language created condition precedent, which was required to occur before 399 Congress could pursue JMA for liquidated damages. Under amended contract, 399 Congress was required, “prior to” JMA being subject to liquidated damages, to “mutually adjust” the schedule to account for any “unavoidable delay.” As 399 Congress did not do so, the Court did not award it the $3 million in liquidated damages sought from JMA.
This decision confirms that Courts will generally implement condition precedents if they are reasonably clear, even in circumstances where the consequences of doing so may be harsh. It is therefore important to be aware of and comply with the requirements which are set out in the contract to avoid later disputes as to their validity or effect. Even a minor mistake or oversight could prevent the relief claimed or assertion of a contractual defense, with potentially huge consequences.
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