New Era Homes Corp. v. Forster

Brief Fact Summary. Plaintiff and Defendant had a contract where Plaintiff would build a house for Defendant. The contract said that Plaintiff would be paid a certain amount of the total price at different stages of the construction when completed. When if came time for the third portion to be paid, Defendant refused to pay. Plaintiff stopped work and sued Defendant

Synopsis of Rule of Law. Merely having a payment schedule in a contract does not make the contract divisible.

Facts. Plaintiff, a builder, contracted with Defendant to build a house for $3,075.00. The contract provided that the Defendant would pay Plaintiff as the work progressed. For example, $1,000.00 would be paid when Defendant delivered the materials and started work. When Plaintiff completed the “rough work”, it was time for Defendant to pay the third installment. Defendant refused to pay the installment. Plaintiff stopped work and sued Defendant for the third installment.

Issue. Was the Plaintiff entitled to the third installment as damages or to the whole amount of the contract minus what Plaintiff did not complete?

Held. Plaintiff is entitled to the whole contract price minus the value of the work not done.
Even though the contract set various stages in the project where installments of various amounts were to be paid, it does not follow that these stages of the project were worth the installment to be paid upon their completion. For example, $450.00 dollars was to be paid upon signing the contract. Signing the contract was not worth $450 dollars.

Dissent. The behavior of the parties suggests that they believed that the various stages in the project were worth the amount of the installments.

Discussion. A mere installment plan does not make a divisible contract (separate contracts).