by: Barry Dorans

When an owner hires a contractor to perform construction and the work goes poorly, damages is one of the issues that can be contested.

In general, when a contractor fails to perform the contract according to its terms, the owner can recover the costs to repair what had been done so that the contract has been fully performed. For example, if an owner hires a contractor to paint a house, the contractor paints half the house and then fails to return, the owner should be able to recover the costs to hire another contractor to complete the painting of the house. The second contractor may charge more on a per square foot basis, either because the job is smaller or because it is trying to match the work by the original contractor, but in either event, the owner should still be able to recover the costs to finish the work.

Two important exceptions to the “cost to repair rule” are when the cost to repair is: (1) grossly disproportionate to the results obtained, or (2) would involve unreasonable economic waste. The issue of unreasonable economic waste was involved in the case of Lockhaven Company v. Master Pools, 233 Va. 537 (1987). In that case, the owner hired the contractor to build a pool for $18,537 and it was specific in the contract that the pool would be 8’6” deep so that it could be used for diving. When the pool was constructed, unfortunately, it was only 7’9” deep. As a result, the owner was not allowed to use a diving board. The owner obtained an estimate to remove the existing pool and install a new pool that was 6” deeper and that cost was $21,500. The Supreme Court held that the owner could not recover that amount because it would involve destroying a pool which, while not suitable for diving, was suitable for general use as a swimming pool. Instead, the only thing the owner could recover would be the difference, if any, between the value of the house with a pool that was suitable for diving and the value of the house with a pool that was too shallow for diving.

An illustration of the principle of a cost to repair that is grossly disproportionate to the results that would be obtained is where an owner has requested a specific appearance and the contractor fails to achieve that appearance but the structure is otherwise sound. In one case, the architectural plans showed that the roof overhang around the house would be 12” which would give the house a certain appearance. When the roof was constructed, the contractor made an error and the overhangs were only 10”. While the cost to extend the roof an additional 2” was extremely expensive, the only result would be a difference in the appearance of the house since the amount of overhang did not in any way impact the use of the home. Since the costs to repair would be grossly disproportionate to the results, the owner would be limited to the difference in the value of the home with 12” overhangs as opposed to 10” overhangs.

In conclusion, whenever a contractor has failed to perform the terms of the contract, in evaluating damages, you must first evaluate what the costs would be to restore the project to the conditions called for in the contract. Second, you need to consider whether that would involve a cost grossly disproportionate to the results to be obtained or would involve unreasonable economic waste.