Architect Parsons (Plaintiff) entered into a contract with Bristol Development Company (Defendant) to design an office building in Santa Ana and assist in supervision of construction. Under the contract, it was a condition precedent for Bristol to obtain satisfactory financing arrangements before it had to perform phase two of the contract or pay Parsons his fee for that portion.
When payment of money is to be made from a specific fund, and not otherwise, the failure of such fund will defeat the right of recovery.
Bristol obtained a construction loan offer, conditioned upon its ability to demonstrate clear title to the property. Bristol paid Parsons 25% of his fee, in accordance with the contract, and Parsons began to draft final plans and specifications for the project. Bristol was unable to show clear title and could not get the construction loan, and notified Parsons to stop work.
Parsons brought an action to recover for services performed under the project and to foreclose a mechanic’s lien on the lot. The trial court found that Bristol’s obligation to pay was conditioned upon the existence of construction loan funds, and entered judgment for the Defendants.
Was obtaining a construction loan a condition precedent to Bristol’s obligation to pay Parsons?
· Parsons did not show that Bristol failed to make proper and reasonable efforts that were contemplated to secure the loan.
· Parsons did not establish grounds for applying the doctrine of equitable estoppel; nor did he show that Bristol breached the duty to give him notice when it became clear that construction funds could not be obtained.
Each party to a contract has a duty to do what the contract presupposes he will do to accomplish its purpose. Bristol made efforts to secure the construction loan, but was unsuccessful. The risk that the loan might not be obtained even though Bristol acted properly and in good faith was a risk clearly anticipated when the parties entered the contract.