As a general rule, the proper measure of damages in cases involving the breach of a construction contract is "the difference between the amount due on the contract and the amount necessary to properly complete the job or to replace the defective construction, whichever is appropriate". Where, however, "the contractor's breach was unintentional and constituted substantial performance in good faith", and remedying the defective performance would result in unreasonable economic waste, damages should be based upon "the difference between the value of the property as constructed and the value if performance had been properly completed"
Lyon v. Belosky Construction, Inc.
Plaintiffs contracted with defendant to build a custom home for $247,000. While building it, the dormer over the was built and rebuilt, but still found to be unsatisfactory and thus removed. After completion, the roof was noticed to be centered over the wrong area, causing a larger overhang over the main entrance. It was also noticed that the entrance pillars could not be used as intended.
Trial court found that defendants breached their contracts and that plaintiffs were entitled to $73,182.66—the cost to replace the roof.
Would rebuilding a differently-designed roof constitute unreasonable economic waste?
Based on the defense of economic waste, the damages should only be the diminution in value, not the cost of replacement.
Page 1063, Paragraph 1
Plaintiffs had a house custom built at far above the market value thereof to have it built as they wished. They hired multiple professionals to help with this and clearly cared about the external appearance. Failing to build it like this is a substantial defect and plaintiffs are entitled to have it fixed.
No, requiring defendants to remedy the problem would not result in unreasonable economic waste. Affirmed with costs.