La. Civ. Code Ann. art. 2021, amended by La. Civ. Code Ann. art. 1767, defines conditional obligations as those made to depend on an uncertain event. La. Civ. Code Ann. art. 2043, amended by La. Civ. Code Ann. art. 1767, notes that an obligation subject to a suspensive condition depends on a future and uncertain event. When an obligation is subject to a suspensive condition, the very existence of the obligation depends upon the occurrence of the event. Whether the parties intended to create a condition, or only to modify the obligation without making its existence depend on the event, is determined in doubtful cases by applying the rules established for the interpretation of obligations.
Both contracts involved clauses that plaintiff subcontractors would receive payment after the receipt of payment by the defendant general contractors from the owner. Defendants refused to pay plaintiffs when the owner went bankrupt. Defendants argued that the payment clauses were suspensive conditions, and the appellate court agreed. The state supreme court reversed the appellate court's ruling in favor of defendants and remanded for further proceedings.
Were defendant contractors relieved from paying plaintiff subcontractors based on the owner's default in paying defendants?
The appellate court's interpretation of the clauses was incorrect, because in neither subcontract was it recited or implied that the subcontractor was, in effect, an insurer of the owner's solvency. The provisions created terms for payment. The payment provisions indicated that payment by the owner was viewed as a reasonably certain event. Thus, the clauses related to the time when defendants had to pay, not whether defendants had to pay. Defendants' failure to include any conditional language defeated their argument.