Damages in a Construction Dispute
Let me present you with a scenario that I have now heard at least dozens of times and maybe more than a hundred at this point. A homeowner hires a contractor do perform renovation work at their home. Let’s say, that the project is to renovate the kitchen for $100,000. The contractor starts the job and after being paid $65,000, the contractor abandons the job. The homeowner hires a new contractor to finish the job. In the meantime, the homeowner calls me and wants to sue contractor number 1 for breach of contract and a host of other causes of action.
Whether a homeowner has damages in this situation depends on the cost to complete. If the second contractor is charging $40,000 to finish the job, then the homeowner’s damages are $5,000 – not $40,000. Why is this? When the homeowner decided to redo the kitchen, he agreed to pay $100,000 for that work. Until the homeowner has spent MORE than the contracted price, there are no damages. If the homeowner could recover $40,000 worth of damages, then he will have only paid $65,000 for the kitchen work, instead of the $100,000 he agreed to pay.
Further, if the homeowner found a contractor to complete the work for only $25,000, then technically, the homeowner owes the first contractor $10,000.
This is a difficult concept to understand because it seems like the homeowner has been damaged in the amount left on the contract, but that is not the case in the eyes of the law.