Full access allows:
- Solve all tests online without limits;
- Remove all advertisements on website;
- Adding questions to favorite list;
- Save learning progress;
- Save results of practice exams;
- Watching all wrong answered questions.
8. If the construction company sues the warehouse owner for monetary relief, what is the maximum amount that the construction company is entitled to recover?
Upon encountering the rock formation, the construction company, instead of incurring additional costs to remove it, built the access driveway over the rock with a steep grade down to the highway. The warehouse owner, who was out of town for several days, was unaware of this nonconformity until the driveway had been finished. As built, it is too steep to be used safely by trucks or cars, particularly in the wet or icy weather frequently occurring in the area. It would cost $30,000 to tear out and rebuild the driveway at highway level. As built, the warehouse, including the driveway, has a fair market value of $550,000. The warehouse owner has paid $470,000 to the construction company, but refuses to pay more because of the nonconforming driveway, which the construction company has refused to tear out and rebuild.
A construction company contracted with a warehouse owner to construct for $500,000 a warehouse and an access driveway at highway level. Shortly after commencing work on the driveway, which required for the specified level some excavation and removal of surface material, the construction company unexpectedly encountered a large mass of solid rock.
Comments (0)
There are no comments at the moment. If you found an error or think question is incorrect, tell everyone about it
Only signed in users can write comments
Signin
When a builder in a construction contract has substantially, but not completely performed, he may recover as a plaintiff on the contract IF the owner received value from the partial performance. The builder will recover the value of the work done, even if that work does not amount to substantial performance of the contract.
D is correct. The general damages rule for measuring loss to an owner for breach of a construction contract is that the owner is entitled to damages in an amount equivalent to the cost of completing the work as promised (i.e., fixing the problem). Although the fair market value of the constructed warehouse and the defective driveway ($550,000) exceeds the contract price ($500,000), the warehouse owner nonetheless is entitled to the cost of fixing the defect ($30,000) because these damages fairly reflect his loss resulting from the defective construction. The warehouse owner, therefore, was justified paying only $470,000 to the construction company (of the original $500,000 agreed upon) and withholding that $30,000 from the contract price.
A is incorrect. Even though the fair market value of the newly-constructed warehouse and driveway ($550,000) exceeds the original contract price ($500,000) by $50,000, the owner is still entitled to deduct the $30,000 cost to remedy the defect from the contract price, as this will avoid unfairly enriching the breaching builder.
B is incorrect. The warehouse owner can recover damages for breach regardless of whether the construction company substantially performed the contract. The cost of correcting the problem would not involve economic waste, which is where there is an «undue» level of economic waste. That situation is not applicable here.
C is incorrect. The warehouse owner is still entitled to complete damages for the breach of contract, as explained above. This means the owner can withhold the entire $30,000, and the company should receive nothing.