Groves v. John Wunder Co.

Supreme Court of Minnesota · 1939 · Contracts

Contractsdamagescost of completionwillful breacheconomic wasteexpectation damagesconstruction contractscost of completion

Facts

Groves leased 24 acres of industrial land to defendant for seven years and transferred its screening plant, while defendant agreed to remove sand and gravel and leave the premises at a uniform grade substantially the same as the roadway grade, using overburden to establish and maintain that grade. Defendant deliberately breached by taking only the richest gravel and surrendering the property in a broken, rugged, uneven condition, not at the required uniform grade. The trial court found that completing performance under its construction of the contract would require excavation and removal of 288,495 cubic yards of overburden at a reasonable cost of more than $60,000. If defendant had performed, however, the property's value on the relevant date would have been only $12,160, and judgment was entered for that lesser amount.

Issue

When a contractor willfully breaches a contract to improve land by failing to do the promised grading work, are damages measured by the land's diminished market value or by the reasonable cost of completing the promised performance? Also, does the doctrine against economic waste justify limiting damages here?

Rule

In a building, construction, or land-improvement contract, the law aims to give the promisee the promised performance so far as money can do so. Therefore, for a willful breach, damages are the reasonable cost of completing or remedying the promised work, not the difference in the land's market value, unless physical remedy would require imprudent and unreasonable economic waste such as tearing down or rebuilding a completed structure.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Duluth, Nora Ellison paid Iron Vale Excavation to regrade her industrial parcel so the surface would be left at a specified uniform elevation for future rail access. After removing salable fill, Iron Vale intentionally stopped work and returned the land with deep ridges and pits; finishing the grading would cost $180,000, but the parcel's market value would increase by only $35,000 if the work were completed.

If Nora sues for breach of contract, what is the proper measure of damages under the majority rule?

Explanation. The majority rule is that for breach of a building, construction, or land-improvement contract, damages ordinarily give the promisee the promised physical performance so far as money can do so. Thus the owner recovers the reasonable cost of completion or remedying the defect, not merely diminution in market value, especially where the contractor willfully refused performance. The low present market value of the land does not reduce the owner's contractual right to the promised improvement.