Recent Florida Case Highlights Accord and Satisfaction and Final Payment Contract Provisions as Potential Traps for the Unwary Contractor

A recent opinion by a Florida appellate court, Construction Consulting, Inc. v. District Board of Trustees of Broward College [1], is a cautionary tale for contractors.  It highlights that construction contractors need to be vigilant regarding the terms of their contract related to final payment and any conditions put on the final payment by the owner that might make acceptance of final payment constitute an accord and satisfaction that could bar any further claims for payment.  

The Facts of the Case

Construction Consulting, Inc. (“CCI”) was party to a Master Contract with Broward College under which the College hired CCI to work on numerous construction projects [2].  During the course of the work, disputes arouse regarding CCI’s performance and payment on certain of the projects with the College.  After several meetings between the College and CCI regarding the dispute, the College prepared and sent to CCI a “Reconciliation Report” which detailed what the College believed to be owed to CCI as the final payment on the various projects, which amounts totaled $165,241.34.  This was less than the amount that CCI contended it was owed and did not include any interest that CCI claimed was due under Florida Local Government Prompt Payment Act, section 281.735, Florida Statutes.  Along with the Reconciliation Report, the College sent CCI three checks, totaling $165,241.34, which corresponded with the final payment amounts for each project on the Reconciliation Report.  The checks themselves did not contain any “Payment in Full” language.  

After receiving the Reconciliation Report and the checks, CCI deposited the checks.  It then wrote a letter to the College in which it contended that the amounts in the Reconciliation Report improperly reduced the amounts CCI was due under the Master Contract.  CCI also claimed that it was due additional interest from the College for late payments under the Prompt Payment Act.  After the College refused to pay any additional funds, CCI filed a lawsuit against the College asserting claims for breach of contract and for interest under the Prompt Payment Act, among other claims.  

The trial court ultimately granted summary judgment in favor of the College on all of CCI’s claims under the doctrine of accord and satisfaction.  The trial court also ruled that under the terms of the Master Contract, CCI’s acceptance of final payment from the College constituted a release of any claims for additional payment.  CCI appealed the trial court’s decision to the Florida Fourth District Court of Appeal, and the appellate court also ruled in favor of the College.  

The Court’s Analysis of Accord and Satisfaction

On appeal, the Court first explained the legal doctrine of accord and satisfaction, noting that the doctrine has long been part of Florida contract law: “An accord and satisfaction results when: (1) the parties mutually intend to effect a settlement of an existing dispute by entering into a superseding agreement; and (2) there is actual performance in accordance with the new agreement.” [3]  “Compliance with the new agreement discharges the prior obligations.” [4]

The Construction Consultants Court noted that the Florida Supreme Court has stated that when a claim is in controversy and “the party to whom it is due accepts payment in full it will operate as an accord and satisfaction even though the party to whom paid declares that he takes it only in partial satisfaction.” [5] The language used by the parties in a transaction is crucial to the creation of an accord and satisfaction. “An accord and satisfaction results as a matter of law only when the creditor accepts payment tendered on the expressed condition that its receipt is deemed to be a complete satisfaction of a disputed issue.” [6] 

The Court in the Construction Consultants case also explained that Florida courts have recognized that a creditor’s acceptance of payment results in an accord and satisfaction where “the check itself or an accompanying writing expressly indicates that the check constitutes payment in full of the debtor’s obligations.” [7] Accordingly, if the creditor does not agree, “then the proper course of action is to return the check.  Simply put, the creditor cannot have his cake and eat it too.” [8] 

Applying these principals, the Construction Consultants Court, ruled that CCI’s acceptance of the checks from the College that were accompanied by the Reconciliation Report constituted an accord and satisfaction that barred any further claim for payment by CCI.  The Court focused on the fact that the Reconciliation Report expressly stated that it was intended to be “Final Resolution for payment to CCI” and a “final agreement” between the College and CCI “to reconcile final payment due to CCI for outstanding invoices” as clear indication that the checks accompanying the Reconciliation Report were intended as payment in full of the College’s obligations even though the checks themselves did not contain any similar language.  

The Court rejected CCI’s argument that the College’s failure to pay interest under the Prompt Payment Act precluded a finding of an accord and satisfaction.  Instead, the Court ruled that the accord and satisfaction was a new settlement contract and the law has long recognized that parties can waive statutory rights as part of a settlement.  

The Court also rejected CCI’s argument that the Reconciliation Report could not be binding because the Master Contract required both parties to sign any modification.  Rather, the Court found that an “accord and satisfaction is a superseding agreement rather than a modification to the original agreement” and that the Reconciliation Report was an offer to enter into an accord and satisfaction, which CCI accepted by cashing the checks accompanying the Reconciliation Report.  

The Court’s Analysis of the Contract Final Payment Provisions

In addition to CCI’s claims being barred by the legal doctrine of accord and satisfaction, the Construction Consultant’s Court also found that CCI’s acceptance of the checks as “Final Payment” constituted a waiver and release of all claims for additional compensation under the terms of the Master Agreement.  This is because the Master Agreement defined “Final Payment” as “all unpaid sums due [CCI] under this Agreement, less any amount properly withheld pursuant to this Agreement.”  The Court held that by so defining “Final Payment”, the provisions of the Master Contract related to Final Payment would apply to a situation even where all work was not completed because, as in this case, CCI had stopped work.  The Court explained that “by offering Final Payment in the Reconciliation Report, the College was offering to pay ‘all unpaid sums due’ to CCI under the Agreement.  

Importantly, the Final Payment section of the Master Contract also expressly stated that “acceptance of Final Payment shall constitute an unconditional waiver and release of all claims by [CCI] for additional compensation beyond that provided in the Final Payment.”  The Construction Consultants Court held that “because CCI accepted the Final Payment by depositing the checks, the acceptance constituted an unconditional waiver and release of any claims for further compensation” under the Master Contract.  

Conclusion and Takeaways for Contractors

The Construction Consultants case illustrates several key areas that contractors need to watch carefully to avoid the fate of the contractor in that case.  First, contractors need to carefully review and negotiate the final payment provisions of their construction contracts with project owners.  To the extent they can, contractors should try to avoid contract language similar to the language in Construction Consultants making final payment a unconditional waiver and release of all claims for additional compensation.  At a minimum, language should be added that acceptance of final payment is not a waiver of still pending claims previously made in writing.  

Second, contractors should ensure that they have made any pending claims in writing prior to final payment, and should state in writing that such claims are still outstanding and not being waived by acceptance of final payment prior to accepting final payment.  Such carve outs or exceptions should also be included in any lien releases provided in connection with final payment.    

Finally, contractors need to be wary of any communications from the Owner accompanying payment, or any statements on checks for payment, to the effect that the payment is intended as “final payment” or “final resolution” or “payment in full” when there are still pending claims for compensation asserted by the contractor that it does not intend to resolve by accepting payment.  When in doubt, and particularly if the pending disputed claim is substantial, the contractor should not accept the asserted final payment as the final payment due under the contract and should return the check without depositing it.  As can be seen from the Construction Consultants case, failure to do so may result in an accord and satisfaction barring any ability to recover more than the payment made by the owner. 

[1] 47 Fla. L. Weekly D1847, 2022 WL 4088299 (Fla. 4th DCA Sept. 7, 2022).
[2] Id. at *2
[3] Id. at *5 (quoting Martinez v. S. Bayshore Tower, L.L.L.P., 979 So. 2d 1023, 1024 (Fla. 3d DCA 2008).
[4] Martinez, 979 So. 2d at 1024.
[5] Miller-Dunn Co. v. Green, 16 So. 2d 637, 638 (Fla. 1944).
[6] St. Mary’s Hosp., Inc. v. Schocoff, 725 So. 2d 454, 456 (Fla. 4th DCA 1999).
[7] Id. at *6 (citing cases).
[8] Burke Co. v. Hilton Dev. Co., 802 F. Supp. 434, 439 (N.D. Fla. 1992).