Can a contractor (or subcontractor) who has substantially completed his contract work lose his right to be paid if he fails to fully complete? Under Massachusetts law, the answer is an emphatic yes!
Recovering payment for work performed under contract requires either full and complete performance of that contract, or substantial completion accompanied by a good faith intention to fully complete. Where full contract completion is not achieved, the right to payment depends on whether the contractor has attempted in good faith to complete. Where a contractor has not fully completed, and a court determines that he did not attempt in good faith to fulfill all contract requirements, then that contractor will recover nothing. He will have lost the right to be paid any amount even where the value of his performance greatly exceeds any prior periodic payment.
This could happen where, for example, a contractor, who substantially completed his contract work, refuses to return to perform punchlist items without any legally justifiable excuse. The court would regard the contractor’s unjustified refusal to complete as an intentional departure from contract requirements.
As a matter of law, an intentional departure is not consistent with a good faith attempt to fully perform. A contractor who intentionally departs from the requirements of his contract cannot recover either the contract price or the fair value of his work. In effect, he forfeits his right to any payment.
This is a harsh rule of law in its application. But Massachusetts courts enforce that rule with one exception. A contractor may not forfeit his right to all payment if the work he neglects to perform is so small as to be inconsequential. In that circumstance, the court could determine the incomplete work was "de minimis" (too minimal to affect legal rights) and allow recovery.
This rule of forfeiture does not apply where the contractor has been prevented from completing by the other party’s breach. But where the other party has not committed a breach, the contractor’s right to recover payment requires either full completion of all contract requirements, or substantial completion accompanied by a good faith intention to fully complete. Anything less is a prescription for disaster.
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