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Florida Appellate Court Clarifies Choice Of Damages A Party Is Entitled To For Material Breach Of Contract

In Forbes v. Prime Gen. Contractors, Inc., No. 2D17-353, 2018 WL 4265287, at *1 (Fla. Dist. Ct. App. Sept. 7, 2018), Florida’s Second District Court of Appeals rejected a trial courts decision to only consider benefit of the bargain damages, holding that in cases involving a material breach of the contract the non-breaching party has the option to elect either benefit of the bargain damages or damages to put them in the place they would have been had the contract never been formed.

The Forbeses and Prime signed a written contract under which Prime agreed to renovate the Forbeses’ home. In exchange, the Forbeses agreed to pay Prime a total of $276,000 in five separate draws at the completion of each phase of construction. Prime began the job as agreed, and the Forbeses paid the first two contract draws—totaling $138,000.

Prior to completing the third phase of the project, Prime notified the Forbeses that the materials it needed to complete the work had gone up. Prime estimated the additional costs would be $550,000—almost twice the original contract price—and demanded that the Forbeses immediately pay the third draw and adjust the payment schedule to incorporate the additional costs. The Forbeses refused to sign a change order to that effect and told Prime that they were prepared to move forward at the contract price. Prime refused and walked off the job.

The Forbeses filed suit against Prime, arguing it materially breached the contract. At trial, the Forbeses sought damages for the amount they already payed Prime, lost equity in their home, and damages for rent incurred during construction. The trial court entered judgment against Prime, but only awarded damages of $5,600.00, the amount the Forbeses paid in rent. The court concluded that the Forbeses failed to offer persuasive or credible evidence at trial of the difference between the market value of the home had it been completed, less such part of the contract price that has not been paid, and the value of the construction that had been furnished by Prime.

The Forbeses appealed, arguing the trial court improperly calculated its damages. The Second District Court of Appeals agreed, holding that the trial court erred by failing to honor the Forbeses’ choice to deem the contract totally breached and recover those damages that would restore them to the position they occupied immediately before contracting with Prime. When a party seeks damages for a total breach, “[h]e may treat the contract as void and seek the damages that will restore him to the position he was in immediately prior to entering the contract.” Or, in the alternative, he may instead “affirm the contract, ‘insist upon the benefit of his bargain, and seek the damages that would place him in the position he would have been in had the contract been completely performed.’ In this case, the trial court only evaluated the benefit of the bargain choice and failed to allow the Forbeses the ability to recover damages to place them in the position they would have been in immediately prior to entering into the contract.

This case is a good reminder of the fact that there is not just one theory of damages a party may assert in a breach of contract claim. It is important to consider all possible damage theories a non-breaching party may be entitled to assert when evaluating a construction dispute involving a total and complete breach.