Florida’s Fourth District Court of Appeal recently concluded that construction manager who accepted a payment for less than the total of his final invoices that was accompanied by a reconciliation report offering it as final payment was barred under both the language of the contract and common law from seeking any further payment. The case is a cautionary tale for contractors dealing with payment issues at the end of any project.
Construction Consulting, Inc. v. The District Board of Trustees of Broward College, arose from a dispute between a college and its construction manager. Over a period of three years, the college hired the construction manager to oversee multiple construction projects on its campus. When the college deemed the construction manager unresponsive on the latest of these projects, the college terminated the construction manager’s contract. In response, the construction manager put together a summary of the projects, including their status and the amounts due for each.
For the three projects, the construction manager claimed that he was owed approximately $178,000.00. Based on the recommendations of its architect, the college believed the construction manager was only owed approximately $165,000.00. Accordingly, approximately a year after the college had terminated the construction manager from the projects, the college sent the construction manager a check in the amount of $165,000.00, plus a reconciliation report identifying the projects that the check corresponded to. The reconciliation report also indicated at the bottom that this total was the “final payment” to the construction manager. No such language was included on the check.
The construction manager deposited the check, and a few days later sent a letter to the college disputing the $12,000.00 deduction in the amount it was owed and asserted a claim for interest under Florida’s prompt payment laws. The construction manager enclosed an invoice in the amount of this interest. When the college refused to pay, the construction manager filed a lawsuit. Ultimately, the college moved for summary judgment, arguing that the construction manager had released all claims when it accepted the final payment. The trial court agreed, and entered final judgment in favor of the college.
On appeal, the Fourth District Court of Appeal agreed with the trial court and affirmed the order, holding that both the language of the contract between the college and construction manager, and the law of accord and satisfaction barred the claims by the construction manager.
Regarding the parties’ contract, the court noted that it stated that “acceptance of Final Payment shall constitute an unconditional waiver and release of all claims by [the construction manager] for additional compensation beyond that provided in the Final Payment. The court determined that the reconciliation report transmitted with the check made it clear that the check was final payment and that it was intended as a final agreement to resolve all outstanding invoices. The reconciliation report also rendered the lack of any “final payment” language on the check irrelevant.
Regarding an accord and satisfaction, the court began by describing what an “accord and satisfaction” is under Florida law, stating:
An accord and satisfaction results when: (1) the parties mutually intend to effect a settlement of an existing dispute by entering into a superseding agreement; and (2) there is actual performance in accordance with the new agreement.
. . .
When a creditor negotiates the tendered check with knowledge of the debtor's intent, whether through discussions, correspondence, or unambiguous language on the check, he is then bound to the agreement and cannot later turn around and sue for the remaining balance due under the former dispute.
Based on this, the court concluded that the construction manager was aware of the college’s position that the $165,000.00 was offered in full satisfaction of all amounts owed, and the construction manager agreed to those terms when it cashed the check.
The critical take away from this case, is not to accept payments that are conditioned on being the final payment unless you actually are OK with that payment being final. While it certainly can be painful to turn down a payment that its close to the full amount, doing so may be the only way to avoid accidentally waiving the right to see any further payment. Contractors (and others in the construction industry) should also consider adding language into their contracts to preemptively avoid the affect of payments marked as final when they are only partial payments. That way, even if a payment is accepted accidentally, there may still be an argument that it was not accepted as payment in full.