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New York Supreme Court, Appellate Division - 80 A.D.2d 318
Tags: Contracts, damages calculation, breach
See also: Peevyhouse v. Garland Coal
tl;dr:
Cost of performance is awarded because grading was not incidental to the contract, even though it is disproportionate to the actual economic value of the product.Video Summary
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The defendant, a demolition and excavating contractor, failed to complete the grading and removal of structures on a 26-acre property owned by the plaintiffs. The lower court awarded the plaintiffs a $90,000 judgment, which the defendant appealed. The court held that the cost of completion was the proper measure of damages, as the defendant failed to perform as agreed. The defendant argued that the proper measure of damage is diminution in value, not the cost of completion, but the court rejected this argument. The general rule for damages in a construction contract breach is that the injured party can recover damages that are the direct and immediate consequence of the breach and were in the contemplation of the parties when the contract was made. If there has been substantial performance of the contract made in good faith, but defects exist, the damages are measured as the difference between the value of the property as constructed and the value if performance had been properly completed. The court affirmed the lower court's decision and rejected the defendant's argument that the contract did not require the removal of all subsurface foundations.
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