Sometimes, the business relationship between commercial contract partners breaks down due to one side’s dissatisfaction with the other’s work. When this happens, the party that contracted for services may elect not to pay the service provider. If it is sued for non-payment, that party may seek to defend its case by asserting an affirmative defense that the service provider did not substantially perform under the agreement because its services were so far below the quality standards that the contract expressly demanded. In one Tampa Bay-area case involving such a scenario, the Second District Court of Appeal reversed a summary judgment for the unpaid service provider because, the court said, the provider’s argument did not conclusively refute all of the potential factual disputes related to the sufficiency of the work performed.
The litigants were two information technology companies, Lucey Corporation and 1010 Logic, Inc. Lucey had a client, Belk Stores Services, that needed certain software design and technical support services. To fulfill this need, Lucey contracted with 1010 Logic to provide these services for nine months in 2013. The deal stated that a Belk employee would review 1010’s work to make sure it met Belk’s qualitative requirements. The contract also said that Lucey didn’t have to pay 1010 for work that did not satisfy Belk’s standards for quality.
1010 assigned one of its developers to do the job. The developer’s work apparently was not to Belk’s satisfaction, and Lucey refused to pay 1010 for the last three months of the developer’s work. 1010 sued for non-payment under the terms of the agreement. Lucey fought back by asserting several affirmative defenses, including arguing that 1010 did not meet its end of the contractual bargain because it “failed to render substantial performance under the terms” of the agreement.
1010 then filed a motion asking the trial judge to issue summary judgment on its non-payment claim. As part of its argument in the summary judgment motion papers, 1010 asserted to the trial court several key things, including that Lucey received payment in full from Belk for the work that was done by 1010’s developer, that Lucey did not fire the developer until the end of the contract, and that the Belk employee responsible for reviewing the developer’s work “expressed regret for not doing more to supervise” the developer.
This was enough for the trial judge, who entered the requested summary judgment. Lucey appealed and won. In a summary judgment situation, the party asking for the judgment is required to show that there is no possible issue of material fact still left outstanding. In this case, according to the appeals court’s opinion, not only had 1010 not eliminated all possible issues of material fact, but also its arguments “failed to meet its initial burden of disproving the sufficiency of Lucey’s substantial performance defense.”
The central problem with 1010’s summary judgment case was that the facts it asserted didn’t actually do anything to eliminate the viability of Lucey’s claim that 1010 didn’t perform as promised under the terms of the contract. As the court explained, even if Belk paid Lucey in full, Lucey didn’t terminate the developer before the contract’s term ended, and the Belk employee expressed remorse about not supervising the developer better, these things did not conclusively eliminate the factual possibility that the developer’s work was so substandard that it was beneath the minimum quality standards required by the express terms of the contract. 1010 needed items tied directly to the quality of the developer’s work, rather than just items that were “essentially inferential arguments.”
When a commercial contractual relationship has soured, and litigation has become a possibility (or more), it is time to make sure you have experienced commercial litigation counsel on your side. The Florida commercial litigation attorneys at Stok Folk + Kon have helped many clients, both plaintiffs and defendants, pursue successful outcomes in their breach of contract cases. Our team is ready to give your business the representation it deserves.
Contact us online or by calling (305) 935-4440 to schedule your consultation.
More blog posts:
Lack of Clarity Costs Concert Producer in Federal Breach of Contract Lawsuit, Florida Business Lawyers Blog, Nov. 4, 2016
Defending Against Summary Judgment Motions in Your Florida Commercial Litigation Case, Florida Business Lawyers Blog, July 8, 2016