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Vol. 2009-05 | May, 2009

Measure of Damages

Query: What is the proper measure of damages to the owner from un-workmanlike construction by a contractor?

Answer: In a residential structure, where there is a breach of a construction contract by the contractor, the general rule for the proper measure of damages is that a landowner whose real property has suffered a temporary injury is entitled to recover reasonable restoration costs, i.e., the reasonable cost of placing the building in the condition contemplated by the parties at the time they entered into the contract, plus the reasonable value of the loss of the use of the property between the injury and the restoration. The landowner’s recovery, however, is limited by the general rule that the recoverable restoration cost cannot exceed the difference between the pre-injury and post-injury fair market value of the real property. In the case where there is a permanent or non-repairable injury to the property, the proper measure of damages is the difference between the pre-injury and post-injury fair market or value of the real property.

Pursuant to the rule on damages, the damages that result from an alleged wrong must be shown with reasonable certainty, and cannot be based upon mere speculation or conjecture, regardless of whether the action is contract or tort.

For investment properties, damages are determined as follows:

  1. Where injury to real property is temporary, the measure of damages, if the property be rented or held for rent, is the diminution in its rental value during the continuance of the injury, in addition to damages for repair of the structure.
  2. If the injury is permanent, then the measure of damages is for the reduction in the market value of the rental property.

When a commercial property is not held for rental income, or is occupied by its owner, but is held for commercial sale, the proper measure of damages, if the defective work be repairable, is the cost of repair, in addition to lost profits from any pending sale. If the damage is permanent and prevents the sale of the property, lost profits from the potential sale may also be recovered.

Underlying all of these measures of damages is the fundamental rule of law that one must mitigate or lessen his damages. For example, in the case of damages in a commercial sale of the property, if the damage is temporary, the owner must have the defects repaired and seek another purchaser of the property. This rule of law is based upon the general principle fundamental to the law of remedies that a party injured by wrongful conduct be made whole. However, in so doing, the damages awarded should not place the injured party in a better position, or betterment, than that party would have enjoyed had the wrongful conduct not occurred.

“The definition of insanity is doing the same thing over and over and expecting a different result.”
Albert Einstein

AUTHOR / EDITOR: J. NORMAN STARK is an Attorney-at-Law, a Registered Architect, (AIA, NCARB) Registered Landscape Architect, Interior Designer, Planner and Senior Appraiser (ASA), admitted to practice law before the Bar of Ohio, the US District Courts, Ohio and Illinois (Central Dist.), the US Court of Appeals, and the United States Supreme Court. He is a Mediator, Arbitrator and Litigator with experience in Business, Construction Law, and Public Works, and with additional experience in Real Estate, Construction Attorney (Legal Project and Crisis Management), and as an Expert Witness (Forensic Architect). His office is in Cleveland, Ohio.