While a property owner is free to claim that a contractor has defaulted on the work to be done and is therefore in breach of the contract, contractors do have defenses that may justify default. Such defenses may even allow the contractor to terminate the contract with the property owner and forego any further work on the project.
One of the primary contractor defenses is that of substantial performance, which may entitle the contractor to be paid the contract price despite the project not being fully completed. When deciding whether the contractor is entitled to such recovery, the court looks for a demonstration that the contractor has completed the project completely enough that the property owner is able to use the property for its intended purpose. In Norberto & Sons, Inc. v. County of Nassau, Dept. of Public Works, 16 A.D.3d 642, 793 N.Y.S.2d 75 (2d Dept. 2005), the court found that subcontractor on a county project hired to construct a pool had substantially performed its obligations, and was entitled to damages for breach of contract, where 95% of the work required had been completed when the general contractor declared it in default.
Another contractor defense that may relieve the contractor of liability for defaulting on a contract is that of owner or architect/engineer interference. In such a case the contractor must demonstrate that he was unable to continue the work because an interference caused by another party made it impossible for him to do so. An example of this degree of interference occurred in Greenspan v. Amsterdam, 145 A.D.2d 535, 536 N.Y.S.2d 90 (2d Dept. 1988), where the contractor successfully demonstrated that he was unable to continue doing work on the project because the owner refused to provide him access to the work site. Another example of interference from the owner that resulted in the contractor having no option but to default occurred in Felix Contracting Corp. v. Oakridge Land and Property Corp., 106 A.D.2d 488, 483 N.Y.S.2d 28 (2d Dept. 1984), where the property owner failed to provide the contractor with information needed to complete the work such as building permits and issued revised drawings after commencement that resulted in drastic change orders.
If at some point during the project, the job becomes impossible to complete, this is an available defense to the contractor for his default. The caveat to impossibility, though, is that the project must be entirely impossible to complete, not simply that it becomes more difficult or expensive to complete. Additionally, the occurrence that renders the completion of the project must be unforeseeable.
A property owner may actually agree to waive a contractor’s default as well. By doing so the date of completion of the contract is extended to that of a reasonable time of completion. By waiving this default, the owner is estopped from suing on the default, and must give the contractor the opportunity to perform.
Although this is not an exhaustive list of contractor defenses, the last of the most common defenses for default is that the property owner failed to pay for the contractor’s services. Assuming the contractor is entitled to such payments, he may also be entitled to terminate the project without being liable for defaulting on the contract.