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2. Will the builder succeed in an action against the expert for damages for breach of contract?
Assume that the builder orally agreed with the expert to accept the man's services and that the man performed on time but negligently installed the wrong air-conditioning equipment.
With ample time remaining under the contract for commencement and completion of his performance, the expert notified the builder that he was selling his business to a man who was equally expert in lifting and emplacing equipment atop tall buildings, and that the man had agreed to «take over the expert-builder contract.»
An expert in lifting and emplacing equipment atop tall buildings, contracted in a signed writing to lift and emplace certain air-conditioning equipment atop a builder's building. An exculpatory clause in the contract provided that the expert would not be liable for any physical damage to the builder's building occurring during installation of the air-conditioning equipment. There was also a clause providing for per diem damages if the expert did not complete performance by a specified date and a clause providing that «time is of the essence.» Another clause provided that any subsequent agreement for extra work under the contract must be in writing and signed by both parties.
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The parties to a contract may stipulate what damages are to be paid in the event of a specific type of breach, which is called a «liquidated damages» clause.
A is correct. It is true that the builder orally agreed to accept the delegation of the expert's duties to lift and install the equipment on the building to the man. However, the builder's mere consent to the delegation did not release the expert from liability in the event of a breach. In order to fully delegate duties and be released from liability, the parties would have had to execute a novation, which acts as a full substitution of the parties. A novation would have required both the builder's consent to the delegation to the man AND the builder's release of the expert from liability under the original contract.
B is incorrect. This answer reaches the correct answer with the wrong reasoning. The builder will succeed in recovering damages against the expert for negligence, but not for lack of consideration. A delegation, as a transfer of duties under a contract, does not require separate consideration to be effective. When the expert notified the builder that he was selling his business to the man, who would take over the expert-builder contract, this was an effective delegation. However, the delegation did not release the expert from liability because no novation was executed, as stated above.
C is incorrect. This is an incorrect application of the rules for executing novations. As previously explained, when the builder accepted the delegation of duties from the expert to the man, this alone was not enough to be a novation. The builder would have had to also release the expert from liability under their original contract, which did not occur. As such, this was an effective delegation, not a novation.
D is incorrect. The liquidated damages clause was included in the contract to stipulate to damages in the event of a breach as to the timing because time was «of the essence.» However, this clause did not preclude recovery for other breaches. The man negligently installed the air conditioner, albeit on time, and the builder retained the right to sue any liable parties for that breach. As such, the builder may sue the expert, who remains liable, for the negligent actions of the man.