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Contracts • Remedies for Unexcused Non-Performance
K#169
Legal Definition
If the owner breaches before completion, then: (Profits from Contract) + (Costs Expended).
If the owner breaches after completion, then: (Contract Price) + (Interest)
If the builder breaches, then: (Cost of Completion) + (Reasonable Compensation for Delay).
If the owner breaches after completion, then: (Contract Price) + (Interest)
If the builder breaches, then: (Cost of Completion) + (Reasonable Compensation for Delay).
Plain English Explanation
In a construction contract breach, the damages calculation changes based on whether it’s the owner or the builder who breaches:
(A) If the owner breaches before completion: The builder is entitled to (Profits from the Contract) + (Costs Expended). This means the builder recovers the money they’ve already spent on the project and the profit they would have made had the contract been completed.
(B) If the owner breaches after completion: The builder can claim the (Contract Price) + (Interest). Here, the builder receives the full contract price plus any interest for delayed payments.
(C) If the builder breaches: The owner is entitled to (Cost of Completion) + (Reasonable Compensation for Delay). This covers the expenses the owner incurs to finish the project with someone else and any compensation for delays caused by the builder’s failure to complete the work.
(A) If the owner breaches before completion: The builder is entitled to (Profits from the Contract) + (Costs Expended). This means the builder recovers the money they’ve already spent on the project and the profit they would have made had the contract been completed.
(B) If the owner breaches after completion: The builder can claim the (Contract Price) + (Interest). Here, the builder receives the full contract price plus any interest for delayed payments.
(C) If the builder breaches: The owner is entitled to (Cost of Completion) + (Reasonable Compensation for Delay). This covers the expenses the owner incurs to finish the project with someone else and any compensation for delays caused by the builder’s failure to complete the work.
Hypothetical
Hypo 1: Bob builds houses. Sam hires Bob to build his house. They agree to a price of $100,000. Bob expects to make a profit of $20,000 on building Sam's house. After Bob spends 5 days working and buys $10,000 in materials, Sam fires Bob after catching Bob flirting with his wife. Result: Bob can sue Sam for $30,000 (the profit he would have made on the contract, plus the $10,000 he spent on materials).
Hypo 2: Bob builds houses. Sam hires Bob to build his house. They agree to a price of $100,000. After spending 5 days working on the house, Bob decides he wants to become a priest instead and abandons the job. Sam is forced to hire another developer who finishes the house for $120,000. Result: Sam can sue Bob for the $20,000 it took to complete the house.
Hypo 2: Bob builds houses. Sam hires Bob to build his house. They agree to a price of $100,000. After spending 5 days working on the house, Bob decides he wants to become a priest instead and abandons the job. Sam is forced to hire another developer who finishes the house for $120,000. Result: Sam can sue Bob for the $20,000 it took to complete the house.
Visual Aids
Related Concepts
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