A homeowner breaches a construction contract after paying $45,000. The market value of the work at breach is $40,000; The contractor used oak flooring on another job. What is the largest recovery for the contractor?

• A. $50,000
• B. $40,000
• C. $30,000
• D. $60,000

Answer: (A)

The key idea is to put the nonbreaching party in the position they would have been in had the contract been performed. Here, the homeowner paid 45,000, but the work to be delivered is worth 40,000 at the time of breach. The contract price represents what the homeowner promised to pay for the promised performance, while the market value of the promised performance at breach reflects the actual value of what was promised but not received.

Damages can include the amount paid plus the loss in value from not receiving the promised performance. So, recoveries would be 45,000 (the price the homeowner already paid) plus the additional amount representing the lost value of the promised performance, which is 45,000 − 40,000 = 5,000. Totaling these gives 50,000. The fact that oak flooring was used on another job shows the contractor could reallocate materials, but it does not change the calculation of the damages here.