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Alena Morris, Anthony Labarga, Nalin Vahil
6 November 2012
Foreman (p) v. R and L Builders (d) (1995)
Opinion of the Court
In the case at hand, homeowner Foreman hired R and L Builders to construct a swimming pool
of maximum depth seven feet six inches. For this work, the defendant was paid $100,000. When
the plaintiff discovered that the pool was only six feet nine inches at its deepest, he sued the
defendant and asked that the pool be rebuilt to the specifications on the contract. To do so would
cost the defendant $33,000. The defendant admits that a breach of contract occurred, but asks
that the plaintiff be awarded $4,000. This sum is an expert’s calculation of what amenity the
plaintiff has lost due to the pool being less deep that the contract specified.
In a case such as this one, where the cost of performance is many times the expected rise in value
of the property if the contract is fulfilled verbatim, there are conflicting precedents. In Groves v.
John Wunder Co., the Supreme Court of Minnesota decided that the proper remedy for a breach
of this sort is the cost of performance. However, in Peevyhouse v. Garland Coal, the Supreme
Court of Oklahoma ruled that the appropriate remedy is the change in market value due to the
breach.
This case is more similar to Peevyhouse than to Groves, in that the property in question is for
personal use rather than an investment. If we are to follow the arguments used in Peevyhouse, we
must award the plaintiff nothing. According to the opinion in Peevyhouse, “the damages which
lessor may recover are limited to the diminution in value resulting to the premises due because of
the non-performance.” It has been established that the breach leaves the pool no less valuable
than if it had been completed, so the diminution is zero.
Yet to rule this way is ill-advised. Suppose a contractor is hired to complete project X, which
costs $5,000 to construct. He notes that instead, he can complete some project Y, with a similar
market value, for $4,000. If the Peevyhouse rule is followed, the contractor is not at fault if he
completes project Y, contrary to the wishes of the property owner. This would incentivize
inefficient investments in writing more enforceable contracts so that owners of property can be
sure that they will receive what they make a contract for. It would similarly disincentivize the
making of contracts in cases where achieving such a certainty is not possible.
We may also consider the precedent set by Jacob & Young v. Kent (1921), referenced in
Peevyhouse. In that case, a contractor was not required to replace the piping in a house just
because he had used a different type of pipe from the type specified in the contract. Similarly to
this case, the contractor’s action did nothing to reduce the functionality or market value of the
completed job. This court departs from this precedent for a few reasons. In Jacob, the builder
was unaware that he was using the wrong kind of pipe. It is much more difficult to believe that a
contractor who is building one object can inadvertently build that object to an incorrect scale.
Also, Jacob deals with an aspect of property which is meant to be used, not seen. Therefore the
rule to employ in that case was substantial performance, since the pipe had a functional rather
than aesthetic purpose. Since the point of controversy here is a swimming pool, which has an
aesthetic purpose, the plaintiff is entitled to perfect tender.
The defense argues that rebuilding the pool would create “economic waste” (i.e. destroy an
existing structure), and this is true. However, their argument that expectation damages are thus
the proper remedy does not follow. Granting specific performance does not guarantee that the
plaintiff will rebuild the pool; indeed, he has claimed that, if given the sum needed to rebuild the
pool, he will not do so. Specific performance gives the two parties the option to negotiate a
settlement. The defendant is willing to pay any sum less than the cost of rebuilding the pool, and
the defendant is willing to accept any sum greater than the loss of amenity. Although it creates a
bilateral monopoly, this remedy allows for greater flexibility in negotiating an efficient outcome.
While this court agrees with the defense that expert estimation of damages is central to the legal
system, we must respect the subjective nature of the plaintiff’s valuation of a pool of the depth
specified in the contract. The pool is an element of the plaintiff’s property and for his personal
use. The defense asks us to give the plaintiff a 4% refund for a 10% reduction in depth, but it
may be that the plaintiff has no desire for a pool less than seven feet deep. The fact the plaintiff
will not rebuild the pool does not mean that the argument of subjective value should be annulled.
The fact that the plaintiff is not accepting the defense’s $4,000 offer reveals that this offer does
not make him whole, and so we should not award it.
Contrary to the assertions of the defense, this court feels that to give the plaintiff anything but
specific performance would institute a perverse incentive. There is little reason to enter into
contracts regarding aesthetic undertakings if a contractor could complete some proportion of the
work, then allow a court expert to estimate the difference in value. To quote the dissenting
opinion in Great Western Oil & Gas Company v. Mitchell, “the law will not make a better
contract for the parties than they themselves have seen fit to enter into.” The defense argues that
people will “fear great and unfair damages if for some reason they need to breach”, but our goal
is to ensure that breaches will only occur if they are efficient. By awarding specific performance,
and allowing the two parties to work out a settlement, we ensure that a breach only occurs when
fulfilling the contract truly is excessively costly. In this way, litigation costs will be kept down.
The plaintiff and the defendant both reference the doctrine of substantial performance, but the
plaintiff does so more correctly. The doctrine of substantial performance requires not only that
the good be reasonably the same as the good the plaintiff contracted for, but that the breach also
be through no willful act of the contractor. This was central to the decision in Jacob. While the
plaintiff did not prove that the breach was due to a willful act of the contractor, the defense has
not proven that it did not occur willfully. Therefore, the requirements of the doctrine of
substantial performance have not been met in their entirety. Given that the pool is for personal
reasons, the doctrine of perfect tender, as argued by the plaintiff, is more appropriate.
This court would like to note that it does not accept the plaintiff’s argument by ratios. The ratios
quoted for Groves and Peevyhouse are social ratios, i.e. they compare the cost to the contractor
with the rise in the value of the land, so they compare the net loss to the net gain. The plaintiff’s
attempt to apply this argument to the current case is somewhat deceptive, since it is established
that no ruling will increase the value of the pool. The plaintiff substitutes the expert’s amenity
calculation, with which they otherwise disagree, for a rise in market value. Given that this
estimate is a transfer, not a gain in net wealth, it is not in keeping with the other quoted ratios.
This sort of argument should be avoided, because it distorts the matter at hand.
It is the opinion of this court that awarding the plaintiff substantial performance provides
assurances to those entering into contracts, best approximates economic efficiency, and best
respects the private and subjective valuation of the plaintiff. Given the facts of the case, it will
not create economic waste, nor does it violate the doctrine of substantial performance, nor should
it strike fear into contractors. Therefore, judgment is for the plaintiff, and the defendant must
reconstruct the pool unless they and the plaintiff can come to some other arrangement.
It is so ordered.