Vol. 2000-1 January, 2000


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 be claimed.

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.


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