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Lowy v. United Pacific Insurance Co

Citation. 67 Cal. 2d 87, 429 P.2d 577, 60 Cal. Rptr. 225, 1967 Cal. 205
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Brief Fact Summary.

Lowy (Plaintiff) appeal from a judgment in favor of United Pacific Insurance Co. (Defendant) for damages for breach of contract.

Synopsis of Rule of Law.

When a person agreed to something for another for a sum of money to be paid on full performance, he is not entitled to any part of the money until he has done what he agreed, unless performance has been excused, delayed or prevented by the other party.


Plaintiff entered into a contract with Defendant for certain excavation and grading work on lots and streets along with the street improvement work in a subdivision containing 89 residential lots. The contract provided that the Defendant agreed to provide and pay for all materials, labor, tools, equipment, light, transportation and other facilities necessary for the execution of the work. The price set forth in the contract was $73,500.00. The street improvement work was not included in this price. The contract provided for means to calculate the price for the street improvement work. Defendant performed 98% of the contracted excavation and grading work and then a dispute arose between the parties regarding the payment of $7,200.00 for additional work necessitated by Plaintiff’s change in the plans. Defendant stopped performance and Plaintiff employed other to do the street improvement work. Plaintiff subsequently sued Defendant for breach of contract. Defendant filed a cross-
complaint for damage for breach of contract and reasonable services rendered. The trial court determined that Plaintiff was entitled to nothing against Defendant and allowed Defendant to recover on the cross-complaint. The trial court determined that there were two phases of work to be performed (1) grading and (2) street improvements; and Defendant performed all terms and conditions relating to the grading and the additional work in the amount of $7,200.00. The court also held that Plaintiff breached the contract by employing others to do the street improvement work and by not making the payment to the Defendant for the grading work. Thus, Defendant’s performance was excused.


Whether the contract was divisible and the doctrine of substantial performance was applicable?


Yes. Judgment affirmed.
Since the contract required the performance of two kinds of work and Defendant was to be paid a certain sum for the grading work and a sum to be determined according to the contract, the contract was divisible. Defendant was also required to post to separate surety bonds for the two different kinds of work performed.
Therefore, the fact that the Defendant did not perform the second phase of the contract does not prevent him form recovering for the work done. The Defendant did not fully perform the grading work, the first phase of the contract. The doctrine of substantial performance is applicable here, since the evidence shows that the Defendant performed 98% of the work under the first phase and prevented form completing the balance through the fault of the Plaintiff. When a person agrees to do something for a specified sum of money to be paid on full performance, he is not entitled to any part any part of the money until he has done what he agreed to do, unless performance is excused, prevented or delayed by the act of the other party. When an owner has taken possession of a building, if there has been substantial performance in good faith, if the failure to make full performance can be compensated in damages to be deducted from the price, and if the omissions and deviations were not fraudulen
t and do not affect the usefulness of the building, may recover the amount of contract price remaining unpaid less the amount allowed as damages for the failure of strict performance. Therefore, Plaintiff’s breached the contract and made full performance impossible on the Defendant’s part.


To determine whether a contract is divisible the court must look at the intention of the parties which may be inferred from such factors as the ease with which the agreed consideration can be apportioned to separate performances, the fungibility of the performance and the lack of evidence that the parties would have refused to deal with less than whole.

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