Contracts-Calculating Damages in Home Renovation Projects

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Construction projects have the tendency to create disputes. Avoiding these disputes by knowing your contractor and having a solid contract can alleviate disputes, delays in completion and the financial hardships that often accompany defeated expectations. The case of Forbes v. Prime General Contractors, Inc., 43 Fla.L. Weekly D2094a (2nd DCA 2018) illustrates the damages that are available to the non-breaching party.

In Forbes, the Forbes’ entered into a contract with Prime General Contractors (“Prime”) to renovate their home for $276,000. Midway through the contract, Prime informed the homeowners that the cost of the materials had risen and that the work would now cost $550,000. Prime demanded that the homeowners sign change orders to that effect but the Forbes’ refused. Prime walked off the job. The Forbes rented a home while they looked for a contractor to finish the job. In the meantime, the Forbes found a new home and let the home that was being renovated was lost in a foreclosure sale by the lender. When the Forbes contracted with Prime, they had approximately $45,000 in equity in their home.

The Forbes sued Prime. The Forbes demanded the draw payments made to Prime, the expense of updated architectural plans, the lost equity, the rent and various other expenses in order to put them in the position they would have occupied had they not contracted with Prime.

Under basic contract law, when one party to a contract commits a material breach, the non-breaching party has the option to treat the breach as a total breach of the contract. In turn, the non-breaching party can suspend his or her performance of the contract. When the non-breaching party seeks damages for a total breach, he or she may treat the contract as void and seek damages that restore him or her to the position he or she was in prior to entering into the contract.

Alternatively, he or she may affirm the contract and insist upon the benefit of the bargain and seek the damages that would place him or her in had the contract been completely performed. In the case of a construction contract like the one in this case, that remedy is either the reasonable costs of completion or the difference between the value the construction would have had if completed and the value of the construction that had been performed. In this case, the Forbes were awarded all of their requested damages.

Understanding and addressing the specifics of your contractual relationship is key to addressing the contingencies that may arise, especially with construction contracts where material costs can fluctuate based upon outside forces beyond the parties control.