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12. If the homeowner refuses to retract his repudiation, and the contractor sues him for damages, what is the maximum that the contractor is entitled to recover?
On November 26, the homeowner without legal excuse repudiated the contract. Notwithstanding the homeowner's repudiation, however, the contractor subsequently purchased for $5,000 materials that could only be used in remodeling the homeowner's kitchen, and promptly notified the homeowner, «I will hold you to our contract.» If allowed to perform, the contractor would have made a profit of $3,000 on the job.
On November 15, a contractor, in a signed writing, contracted with a homeowner for an agreed price to personally remodel the homeowner's kitchen according to specifications provided by the homeowner and to start work on December 1. The contractor agreed to provide all materials for the job in addition to all of the labor required.
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When one party to a contract breaches, the other party has a duty to mitigate. That means that they must not, by action or inaction, aggravate the damage caused by the breach and expect the breaching party to be held liable. Here, the contractor purchased (apparently non-refundable) materials that were only useful to the homeowner. The contractor purchased the special materials after the homeowner had repudiated the contract, so he may not recover that $5,000.
Furthermore, the remedies described in the other answers are not appropriate for the fact pattern.
A is incorrect. Answer A offers no remedy, however homeowner breached, and in this case, expectation damages are easy to calculate. So, this answer cannot be correct.
C is incorrect. The contractor cannot recover restitutionary damages. Restitutionary damages usually flow from a quasi-contract where one party has conferred a benefit on the other, and the other party would be unjustly enriched if allowed to keep the benefit. A quasi-contract is imputed by the court in the absence of a valid contract. Here, there is a valid contract, and the homeowner received no benefit from the contract.
D is incorrect. The contractor cannot recover reliance damages. Reliance damages are used when expectation damages are too speculative to calculate. Here, we know exactly what the expectation damages are. Also, recovery of the $5,000 is barred because the builder failed to mitigate his damages. As a result, the builder could not recover the $5,000 under any theory of recovery.