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Grossman Holdings v. Hourihan - 414 So. 2d 1037 (Fla. 1982)

Rule:

For a breach by one who has contracted to construct a specified product, the other party can get judgment for compensatory damages for all unavoidable harm that the builder had reason to foresee when the contract was made, less such part of the contract price as has not been paid and is not still payable. For defective or unfinished construction, the party can get judgment for either the reasonable cost of construction and completion in accordance with the contract, if this is possible and does not involve unreasonable economic waste or the difference between the value that the product contracted for would have had and the value of the performance that has been received by the plaintiff, if construction and completion in accordance with the contract would involve unreasonable economic waste.

Facts:

Late in October 1978, the Hourihans contracted with Grossman Holdings to purchase a house to be built in a planned development. Both the model and the office drawings showed the house with a southeast exposure. The contract stated that Grossman would construct the house "substantially the same" as in the plans and specifications at the seller's office or as the seller's model. In December, a new drawing went on display in the Grossman offices. It showed, among others, the Hourihan's lot and their soon-to-be-built house; unfortunately, the house in the new drawing faced the opposite way from what they expected and wanted. The Hourihans brought this discrepancy to the attention of Grossman's employees and remonstrated against construction of a mirror image of the house they had contracted for. In spite of the Hourihan's objections, the contractors refused to change their plans and began constructing the house depicted in the December drawing. The Hourihans then sued in circuit court for breach of contract. After a bench trial, the circuit court found that Grossman had breached its contract. The circuit court refused to award damages, however, finding that specific performance would be economically wasteful and out of proportion to the good to be attained and that the value of the house had increased substantially since the date of the contract. The district court agreed with the trial court's finding that the contract had been breached, but found that it had applied the incorrect measure of damages. Relying on Edgar v. Hosea, 210 So.2d 233 (Fla. 3d DCA 1968), the third district held that the unreasonable economic waste doctrine does not apply to residential construction. It further found that Grossman's willful and intentional failure to perform according to the plans and specifications nullified its claim of substantial compliance with the contract. The district court found the proper damages to be that amount necessary to reconstruct the dwelling to make it conform to the plans and specifications. Grossman sought review, contending that the measure of damages was the difference in value between the building as constructed and as it should have been constructed. 

Issue:

Did the court properly compute damages?

Answer:

No

Conclusion:

The Court reversed and remanded for a new trial on damages in respondent homebuyers' suit for breach of contract because the trial court improperly refused to award damages and because the appellate court applied the wrong measure of damages. It found that, while reconstruction of the house would result in economic waste, the trial court erred when it refused to consider a damage award and the appellate court erred in its determination of the measure of damages. The Court found that the proper measure of damages was the difference in value as of the date of delivery between the house respondents contracted for and the house that petitioner built.

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