Tag Archives: benefit of the bargain damages

ANTICIPATORY REPUDIATION OF A CONTRACT — THE PROSPECTIVE BREACH

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There are instances where a party can engage in the anticipatory repudiation of their obligations under a contract.  In essence, this is basically a party prospectively breaching the contract by repudiating their obligations in the contract.

A prospective breach of contract occurs where there is absolute repudiation by one of the parties prior to the time when his performance is due under the terms of the contract.  Such a repudiation may be evidenced by words or voluntary acts but the refusal must be distinct, unequivocal, and absolute. Moreover, repudiation can be shown where one party makes additional demands not included in the initial agreement:

            The law is clear that where one party to the contract arbitrarily demands performance not required by the contract and couples this demand with a refusal to further perform unless the demand is met, the party has anticipatorily repudiated the contract, which anticipatory repudiation relieves the non-breaching party of its duty to further perform and creates in it an immediate cause of action for breach of contract.

24 Hr Air Service, Inc. v. Hosanna Community Baptist Church, Inc., 46 Fla. L. Weekly, D1344a (Fla. 3d DCA 2021) (quotations and citations omitted).

In 24 Hr Air Service, an air conditioning contractor agreed to perform repairs to a Church’s air conditioning unit.  However, when the contractor went into the attic to start the repairs, the wooden platform in the attic was unstable and a portion of the ceiling collapsed.  The Church repaired the ceiling.  However, the contractor refused to return to complete its repairs citing safety reasons.  The contractor requested proof the repairs to the ceiling were made before it returned to complete its contracted work and such proof was never provided.

Did the contractor’s refusal to complete its work amount to anticipatory repudiation of its contract by imposing the additional demand of proof of repairs to the ceiling before completing its contracted work?  Both the trial and appellate court believed so.

The Contractor’s request that the Church provide safety assurances of the ceiling repairs constitutes an additional demand that was not agreed to by the parties under the service contract.  Despite the Contractor’s argument that it never abandoned the job, its demand for safety assurances coupled with its refusal to complete the agreed repairs until such assurances were provided was an anticipatory breach of the contract. 

24 Hr Air Service, Inc., supra.

Based on the anticipatory repudiation or breach of the contract, what were the Church’s damages?

The proper measure of damages “would be either the reasonable cost of completion, or the difference between the value the repair would have had if completed and the value of the repair that has been thus far performed.”  24 Hr Air Service, Inc., supra (quotation and citation omitted).  This is referred to as benefit-of-the bargain damages, with the objective to place the damaged party in the position “he would have been in had the contract been completely performed.”  Id.    The party, however, cannot seek what is known as “betterment” or a better deal than what it originally bargained for—a party “can neither receive more than [it] bargained for nor be put in a better position than [it] would have been had the contract been performed.”  Id.

If you are dealing with a breach of contract, or even a prospective breach / anticipatory repudiation of an existing contract, it is advisable to seek legal counsel to assist you in preserving your arguments, the proper measure of damages for the breach, and any potential betterment associated with your damages.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

CONSTRUCTION DEFECT DAMAGES: BENEFIT-OF-THE-BARGAIN OR RELIANCE RECOVERY

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In the preceding article, I discussed a case where an owner sued its contractor and design professional for construction defects and design defects that contributed to the same damage.   There was a valuable discussion in this case as to the measure of damages in a construction defect dispute.  It is a discussion that construction defect parties and practitioners need to know.  A plaintiff needs to know for purposes of proving damages at trial and working with an expert in furtherance of proving their damages.   A defendant needs to know for the same reasons and to work with experts in establishing defenses to an owner’s construction defect and design defect damages.

 

 “The proper measure of damages for construction defects is the cost of correcting the defects, except in certain instances where the corrections involve an unreasonable destruction of the structure and a cost which is grossly disproportionate to the results to be obtained.”  Stated another way, “the measure of damages for breaching a construction contract is the reasonable cost of construction and completion in accordance with the contract, if this is possible and does not involve unreasonable economic waste.”  However, “[i]f in the course of making repairs the owner elects to adopt a more expensive [i.e., a better] design, the recovery should be limited to what would have been the reasonable cost of repair according to the original design.”  [This measure of damages is known as benefit-of-the-bargain damages.]

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As an alternative to benefit-of-the-bargain damages, an injured party has a right to damages based on its reliance interest, including expenditures made in performance or in preparation for performance, the recovery of which will place the injured party in the position it occupied before entering into the contract.  However, “[a]ny benefit retained from the expenditures made in reliance on the contract must be offset against the injured party’s damages.”  In other words, a reliance recovery may be reduced to the extent that the breaching party can prove that a “deduction” is appropriate for any benefit received by the injured party. [This measure of damages is referred as a reliance recovery to damages.]

Broward County, Florida v. CH2M Hill, Inc., 45 Fla. L. Weekly D1736a (Fla. 4th DCA 2020) (internal citations omitted).

In this case, the appellate court held that the trial court erred in its measure of damages because the owner’s damages were based on a redesign that was a different, better design than the bargained for original design (as there was evidence that the original design was doomed from the get-go even if constructed correctly).   Thus, benefit-of-the-bargain damages did not apply–the owner did not present damages to correct defects per the original design but put on damages associated with its different and better redesign.  Yet, the appellate court maintained that if the public owner could not repair the defects in the original design, “a viable alternative measure of damages [under the reliance recovery] was the [owner’s] out-of-pocket costs, less any benefits the [owner] received from the contracts.”  Broward County, supra.   For this reason, the Fourth District remanded back to the trial court to enter judgment based on the owner’s reliance recovery based on the evidence already presented at trial relating to the owner’s out-of-pocket costs for the original design and construction and a potential deduct for the benefit the owner received relative to the original design and construction.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.