September 1, 2025 8:44 pm Published by Jeff Handy |

A recent decision from the Utah Court of Appeals reinforces the importance of honoring payment obligations in construction contracts. The case, Globe Contracting LLC v. Hour et al., 2025 UT App 98,
involved a dispute between a contractor, Globe Contracting LLC, and a property owner, Dr. Raymond Hour, over the construction of a chiropractic office in Salt Lake City.

Key Findings

• Material Breach by Owner: The court found that Hour unjustifiably withheld three progress payments, constituting a material breach. It emphasized that in construction contracts, few breaches are more serious than nonpayment to contractors and suppliers.
• Contract Terms Matter: The contract listed four specific reasons for withholding payment—none of which included delays. The court found no other provision allowing Hour to withhold payment due to time delays.
• Timing of Defects: Alleged workmanship issues arose after Hour had already stopped paying. He did not notify Globe until late September 2016 and failed to give Globe the opportunity to correct the issues, as required by the contract. These issues could not justify withholding earlier payments.
• Good Faith and Fair Dealing: Hour was also found to have breached the covenant of good faith and fair dealing.

Damages and Fees

• Damages Awarded: Globe was awarded $61,901.92 in damages and was permitted to foreclose on the property based on its construction lien.
• Attorney Fees: The trial court awarded Globe $98,531.00 in attorney fees. Hour challenged the award, particularly the inclusion of travel time for Globe’s out-of-town attorneys. The appellate court remanded the issue, requiring the trial court to explain why awarding travel-related fees was reasonable.
• Prejudgment Interest and Costs: The court reversed these awards, ruling that the statute cited (Utah Code § 13-8-5) did not apply. The matter was sent back for reconsideration under other legal grounds.

Why This Matters

This case highlights the risks of withholding payment without clear contractual justification. Courts will closely examine the timing and basis of such decisions, and failure to follow contract terms can result in significant liability.

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