Legal Question in Construction Law in California

The simple answer based on elementary contract-law principles would be that a material breach by X excuses further performance by Y, but there are so many possible exceptions and factors that might change the outcome that I can't say offhand that this is the answer here. For example, waiver of X's breach by Y could shift (or eliminate) the liability, and that may have happened here.

Further, breaching a contract doesn't nullify it; it remains enforceable but the non-breaching party's obligation to perform may be suspended or terminated. For example, if I hire Joe to paint my house, and he walks off the job with the painting half done, my duty to make the final payments under the contract is probably cut off.

In a lot of these cases involving progressively more serious breaches of contract on both sides, there can be very difficult issues for a judge or jury to consider before it can reach a proper verdict, consistent with law and justice. Sometimes a mediator should be brought in before the dispute and finger-pointing gets too bad. Sometimes a neutral third party with legal knowledge can advise the parties on how a court would probably see their respective rights before they land in court.