Query: What is the proper measure of damages to compensate an
owner, for unworkmanlike construction by a contractor?
Answer: In the case of 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 (dates of) injury or loss, and the (date of) restoration.
The owner's recovery 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. However, where there
is a permanent or nonrepairable injury to the property, the proper measure
of damages is the difference between the pre-injury and post-injury fair
market value of the real property.
Evidentiary rules governing damages, require that 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
suit is based upon contract or tort.
As to investment properties that are held for rent, where injury or damage
to real property is temporary, the measure of damages, if the property
is 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. If the injury or damage is permanent, then the measure of damages
is for the reduction in the market value of the rental property.
As to commercial property not held for rent or occupied by its owner,
but is held for commercial sale, the proper measure of damages, if the
defective work is repairable, is the cost of repairs, 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
Underlying 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. The laws of remedies requires only that a party injured by wrongful
conduct be made whole. However, in so doing, the damages awarded should
not place the injured party in any better position than that party would
have enjoyed had the wrongful conduct not occurred.
Damages must be real, provable, supported by competent evidence and testimony
and not conjectural or speculative. Experienced legal construction counsel
may provide the professional skills necessary in contested claims, whether
against a contractor or property insurer.
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Author: 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 has had
experience in business, Construction, Real Property, Litigation and Construction-Legal
Project and Crisis Management.