A homeowner hires a contractor to build a custom deck for $15,000. The contract specifies that the final payment of $5,000 is 'contingent upon the satisfactory inspection and approval by the homeowner.' After completion, the homeowner inspects the deck and, despite it being built to industry standards, states they are not satisfied with the aesthetic appearance and refuses to make the final payment. The contractor sues for the $5,000. What is the likely outcome?
- AThe homeowner must pay, as the deck was built to industry standards.
- BThe homeowner must pay if a reasonable person would be satisfied.
- CThe contractor is entitled to quantum meruit for the work performed.
- DThe homeowner does not have to pay, as their subjective satisfaction was a condition.
Show answer & explanationAnswer & explanation
Correct answer: B. The homeowner must pay if a reasonable person would be satisfied.
When a contract involves mechanical fitness, utility, or quality of work, and includes a subjective satisfaction clause, courts generally apply an objective standard of satisfaction, meaning the party must be satisfied if a reasonable person would be satisfied.
Why the other options are wrong
- A. While industry standards are relevant, the specific clause makes 'satisfactory inspection' a condition, but the standard applied is usually objective for construction.
- C. Quantum meruit (a claim for the reasonable value of services rendered) might be an option if there were no express contract or if the contract was breached, but here the issue is the interpretation of a condition within an existing express contract.
- D. Subjective satisfaction is usually reserved for matters of personal taste, such as artwork or custom garments, not typically for construction projects that can be objectively evaluated.
Conditions of Satisfaction (Objective vs. Subjective)
A contract condition requiring performance to be satisfactory to one party. For matters of personal taste (e.g., art), a subjective standard applies. For matters of mechanical utility or quality of work (e.g., construction), an objective 'reasonable person' standard generally applies, meaning satisfaction cannot be unreasonably withheld.
- Condition precedent to performance.
- Objective standard for mechanical utility/quality.
- Subjective standard for personal taste/aesthetics.
- Satisfaction cannot be withheld in bad faith.
Memory trick: Conditions are the contract's traffic lights, controlling when obligations start or stop.