## Facts

- A contractor agreed by correspondence to perform excavation and concrete work for an owner’s new building at stated unit prices.
- The writings accepted the bid but stated nothing about the time or manner of payment.
- The contractor testified to a prior phone conversation and trade practice allegedly calling for monthly progress payments (approximately 85% on account), with the balance due at completion; the owner denied any such agreement or understood custom.
- The contractor performed work from July to late September and submitted an interim bill for \$896.35.
- The owner refused to pay, citing disputes over the bill’s accuracy and the fact that the job was incomplete.
- The contractor stopped work and sued for the billed amount and additional breach damages; the jury awarded only the billed amount.
- The trial court instructed that, when a contract is silent on payment timing, the contractor is entitled to payment at reasonable intervals as work progresses.
- The Appellate Division affirmed; the owner appealed to the New York Court of Appeals.

## Issues

1. When a construction contract is silent as to the time and manner of payment, is the contractor entitled to progress payments at reasonable intervals, or is payment due only upon substantial performance absent contrary agreement or custom?
2. If the owner refuses to pay an interim bill under such a contract, may the contractor stop work and recover on a breach theory based on that refusal?

## Decision

- The Court of Appeals reversed and ordered a new trial.
- The court held that, absent an express agreement or proven trade custom, payment is not due until the contractor has substantially performed.
- The trial court erred by instructing the jury that contract silence alone entitled the contractor to payments at reasonable intervals.
- Because the verdict may have rested on the erroneous payment-timing theory, the error was not harmless and required retrial rather than entry of judgment for the owner.

## Legal Principles

- If a contract for construction or work does not specify the time of payment, payment is implied to be due only after substantial performance, unless the parties agreed otherwise.
- A progress-payment schedule will not be implied from silence; departure from the default rule requires proof of an express agreement or an established and applicable trade custom understood as part of the bargain.
- Incorrect instructions on when payment is due can distort the breach sequence (who breached first) and warrant a new trial when the jury’s theory cannot be determined.

## Conclusion

The court held that silence on payment terms in a construction contract does not create a right to periodic payments; absent contrary agreement or established custom, the contractor must substantially perform before demanding payment, and the erroneous instruction required a new trial.


Stewart v. Newbury, 220 N.Y. 379, 115 N.E. 984 (N.Y. 1917)