Pg 4

Question 1

If you have a contract with a contractor to build a house for $80,000, but he walked off the job halfway through, and then you made a second contract with a different contractor for $60,000 to finish the job, but you end up paying that contractor $90,000 because you feel bad since the contract isn’t profitable, what happens?

Answer 1

The extra $30,000 is not recoverable because the plaintiff was not contractually obligated to pay it. He can only recover the amount that he contracted for.

Also watch out, because technically the plaintiff hasn’t paid anything to the first contractor, so he wasn’t injured, he actually saved money. He isn’t injured until the cost to complete exceeds the original contract price.

Question 2

If a contractor only does half of a job for you and then walks off, can he get quasi-contractual restoration?

Answer 2

The majority approach is that someone that willfully breaches a contract cannot recover in quasi-contract. So he would probably get nothing because he willfully breached by walking off the job.

Question 3

What is the standard measure for defective performance by a contractor in a construction contract?

Answer 3

The cost to remedy the defect, unless it will be economically wasteful. In that case, then you only get the diminution in value caused by the defective performance [difference between the market price of the property without defects and the market price with defects]. To figure this out, the courts look at what the parties intended. Breach could come from workmanship or the materials that are used.

Question 4

What is the question to ask when there is defective performance by a contractor in a construction contract?

Answer 4

Ask if the owner should get the cost to complete, or the difference in value between the work as promised and the work as performed

Question 5

If there has been defective performance in a construction contract but the cost to complete would be economically wasteful, what happens?

Answer 5

The court has to determine whether the subjective affection of the owner for the intended performance has cultural relevance and isn’t just opportunistic. Disproportionality plays a big role and so does the avoidance of economic waste. Courts try to avoid unreasonable duplication of effort.

Question 6

If the house that you contracted for was defectively built, but the cost to rebuild would be $100,000 where as the difference in the value of the house is only $10,000, what would a court probably do?

Answer 6

Likely will just give you the difference in value instead of allowing you to demolish the house because that would be wasteful. Economic waste is only allowed in the most extreme situations. But if the point of the contract was aesthetic or personal to the owner, courts don’t usually force the owner to just take the difference in value. The difference in value usually only happens when the defective performance involves trivial defects.

Question 7

If the work that you had a contractor do required that he be licensed, and it turns out that he wasn’t, what can he recover on your contract?

Answer 7

He can’t recover anything

Question 8

If a buyer or owner breaches a construction contract, how does that often happen?

Answer 8

• wrongful termination
  – abandonment of the project
  – barring the contractor from the worksite
  – interfering with the contractor’s performance
  – refusing to pay

Question 9

What is the remedy that is given under the majority rule and the minority rule for when a buyer or owner breaches a construction contract?

Answer 9

– majority: gives the contractor the profit he expected to make on the contract plus costs that were expended to date
– minority: gives the contract price minus the cost to complete
– minority alternative: gives the price minus the cost saved

Question 10

What is involved in the majority approach to when a buyer or owner breaches a construction contract?

Answer 10

The contractor gets the profit he expected to make on the contract plus any costs he expended up to that date. I.e.: if a contractor agreed to build a house for $100,000 and construction costs are $75,000, so he expected to make a $25,000 profit, if the owner breaches before any work is done, the contractor gets $25,000. But if he already finished half, he gets $25,000 for lost profit plus the costs that he spent up until that date which would be $50,000.

Question 11

What is involved in the minority rule for when a buyer or owner breaches a construction contract?

Answer 11

This gives the contract price minus the cost to complete. So if the contract price was $100,000, and it would cost $25,000 to complete performance, then the recovery would be $75,000.

Question 12

What is involved in the minority alternative approach for when a buyer or owner breaches a construction contract?

Answer 12

This gives the price minus the cost saved by not having to perform.

Question 13

Are overhead calculations included in the remedy for when a buyer or owner breaches a construction contract?

Answer 13

Not usually, because they would be paid regardless of whether the contract was fulfilled, so they are not usually included.

Question 14

If a buyer or owner anticipatorily breaches a construction contract, what happens?

Answer 14

• repudiation before any work is done: contractor gets his expectancy interest which is his lost profit [difference between the contract price and his cost to perform]

Question 15

What is involved in the contract price for a construction contract?

Answer 15

The cost to do the construction and the profit to the contractor

Question 16

What is involved in the cost to construct for a construction contract?

Answer 16

• labor
• materials
  – overhead like the cost to run the business

Question 17

If a contractor wants to recover overhead expenses, what does he have to show?

Answer 17

That if it weren’t for the owner’s breach, the contract price would’ve covered the overhead expenses

Question 18

If a contractor begins work before an owner breaches a construction contract, what does the contractor get with regard to his partial performance?

Answer 18

The cost of labor and materials expended as well as the profit.

Always measure the contract price against the percentage of work that was actually done. Do not base it on the actual cost of the work that was done

Question 19

If a contractor performs additional work according to a change order, what can the contractor recover?

Answer 19

The fair price of the additional work.

Question 20

If an owner or buyer interferes with a construction contract and causes delay, what can the constructor get?

Answer 20

Any extra costs that were incurred from the unexcused delay, such as:

• increased material costs
• scheduling difficulties
• idle equipment
• employees that weren’t working

Question 21

What law covers your contract for the sale of goods?

Answer 21

UCC

Question 22

What is involved when there is a breach by the seller in a contract for the sale of goods?

Answer 22

The buyer gets the market price minus the contract price as measured on the date of the breach, plus consequential damages

Question 23

What are the three things that are involved in a buyer’s expectancy interest when it comes to a contract for the sale of goods?

Answer 23

– contract-market differential
– incidental losses that are incurred in reasonable efforts to avoid losses from the breach
– consequential losses that are reasonably foreseeable by the breaching party [this includes lost profits]

Question 24

What is the rationale behind giving a remedy to a buyer of goods under a sale of goods contract when the seller breaches?

Answer 24

If the seller had done what he was supposed to do, the buyer would have bought the goods, but now he has to buy them elsewhere. If the market price and the contract price are the same, or if the contract price exceeds the market price, the buyer is not harmed and thus he only gets nominal damages

Question 25

If there has been a breach by the seller in a sale of goods contract and the buyer decides to cover, what can the buyer get as a remedy?

Answer 25

The cover price minus the contract price plus any incidental or consequential damages, less expenses saved.

Question 26

What are the requirements for a buyer to cover when there has been a breach of a sale of goods contract?

Answer 26

He must buy the goods:

• without reasonable delay
• in good faith
• pay a reasonable price
• the goods must be like-kind substitutes [although they do not have to be identical]

Question 27

If there has been a breach of a sale of goods contract by the seller, and the buyer has an opportunity to cover but he doesn’t, what is his recovery?

Answer 27

It is the difference between the price he could have covered for and the contract price. I.e.: if a merchant contracts to buy 10 tomatoes from the seller at 100 each, but before delivery the seller tells the merchant he cannot fill the order, and on that day the merchant could have ordered replacement from someone else for 110 each, but instead he waited, and then there was a drought and now all tomatoes cost 150 each, because he could’ve covered for 110, he only gets the difference between 100 and and the contract price, which is 10.