Takeaway
In short, this case holds that a builder who delivers a livable house may substantially perform despite defects, but the owner's remedy is limited to legally provable loss and cannot fund wasteful reconstruction that adds no market value.
A builder sued homeowners for the balance due under a house-construction contract. The builder conceded that he had omitted several promised items, including kitchen cabinets, gutters and downspouts, a sidewalk, closet poles, and an entrance seat, totaling $1,601.95. The homeowners asserted roughly twenty additional defects and omissions. Their principal complaint was that a wall between the living room and kitchen had been placed more than a foot off the specified location, narrowing the living room. Moving the completed wall would have cost about $4,000.
The homeowners argued that these deficiencies defeated any contract recovery because the builder had not substantially performed. The trial court found substantial performance, awarded the homeowners allowances for proven defects and omissions, rejected several unproven claims, and disallowed the builder's claimed extras because they had not been approved in writing as the contract required. Both sides challenged aspects of the damages calculation on appeal.
Issue #1
Whether the builder substantially performed the house-construction contract despite the omissions and construction defects.
Holding
Yes. The builder substantially performed and could recover the contract price less the homeowners' legally recoverable damages.
Reasoning
Substantial performance asks whether the work achieved the contract's essential purpose, not whether every specification was met perfectly. A house-construction contract ordinarily permits some departure from the plans unless the parties expressly make every detail essential to the agreement.
The court contrasted cases in which performance failed at the contract's core: a boiler that supplied only about half the promised capacity, a boathouse positioned so poorly that it was practically useless, defective painting that failed to prepare the surface as required, and a heating system that could not perform its intended function. The builder's work here, while incomplete and flawed in several respects, provided the homeowners with a completed and livable house.
No mathematical formula based on the percentage of the contract price, cost of completion, or number of defects determines substantial performance. The plans were a stock floor plan, lacked detailed construction drawings and blueprints, and required practical judgment during construction. On this record, the trial court's finding of substantial performance was supported by the evidence.
Issue #2
What measure of damages applies when a builder has substantially performed but the house contains defects or omissions.
Holding
The builder recovers the contract price minus the homeowners' damages; generally, damages are measured by diminished value, but the reasonable cost of correction may be used for separable and relatively minor defects when repair does not cause unreasonable economic waste.
Reasoning
When a contractor substantially but incompletely performs, the proper recovery is the contract price less the owner's damages. The governing general measure is the difference between the value of the house as built and its value had it been built in strict compliance with the contract.
Cost of repair or replacement is not itself the universal measure of damages. It may, however, help establish value and may be awarded for distinct, relatively small defects or omissions that can be corrected without reconstructing a substantial part of the building or sacrificing substantial completed work.
The applicable measure depends on the nature and magnitude of each defect. Here, the court upheld repair-cost awards for ceiling plaster cracks, mud jacking, repair of the patio floor, and reconstruction of a nonstructural patio wall. Correcting those items did not entail unreasonable economic waste.
Issue #3
Whether the homeowners could recover the approximately $4,000 cost of moving and rebuilding the misplaced living-room wall.
Holding
No. The misplaced wall was governed by the diminished-value rule, and the homeowners proved no diminution in market value.
Reasoning
Moving the completed wall would require tearing it down and rebuilding it, damaging adjacent portions of the finished house, and replastering and redecorating at least two rooms. The resulting destruction of completed work made the proposed repair an unreasonable economic waste.
The homeowners had not demanded that the wall be relocated while construction was underway. More importantly, valuation experts for both sides agreed that the wall's placement did not reduce the house's market value. Because diminished value was zero, the homeowners suffered no legally recoverable damage for this defect, even though the smaller living room did not satisfy their personal preference.
Issue #4
Whether the builder was entitled to payment for claimed extras not approved in writing.
Holding
No. The trial court properly disallowed the claimed extras.
Reasoning
The contract required written agreement for extras, and none of the claimed items had been approved in writing. The evidence was also disputed as to whether some items were genuinely extras or whether the homeowners had waived the contractual requirement.
Because the builder bore the burden of proving entitlement to these additional charges, the trial court could reject them on the conflicting evidence. The Supreme Court found no basis to disturb that determination.