K&G Construction Co. v. Harris
Citation and Court
K&G Construction Co. v. Harris, 223 Md. 305 (Md. 1960)
Facts
Harris, a subcontractor, was performing excavation work for K&G Construction when Harris’s bulldozer operator negligently knocked over a wall on the construction site, causing substantial damage. K&G withheld a progress payment. Harris, claiming wrongful withholding of payment, stopped work. K&G then had to hire a replacement subcontractor at higher cost and sued Harris for the difference.
Issue
Whether K&G was justified in withholding payment after Harris’s negligent act constituted a material breach, and whether Harris’s subsequent refusal to continue work was itself a breach.
Holding
The Maryland Court of Appeals held that Harris’s negligent damage was a material breach that justified K&G’s withholding of payment; Harris’s subsequent work stoppage in response to the withholding was therefore an unjustified breach, making Harris liable for the increased cost of completing the work.
Rule / Doctrine
A material breach by one party to a contract discharges the other party’s duty of counter-performance. When a subcontractor commits a material breach (such as negligently damaging the work site), the general contractor’s duty to make progress payments is suspended, and the subcontractor cannot treat the withheld payment as a breach justifying its own work stoppage.
Significance
A foundational case on material breach and the dependency of contractual duties. Illustrates how a court determines whether a breach is material (examining the extent of harm, the likelihood of cure, and the adequacy of compensation) and the consequences of a material breach on the injured party’s obligations.