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Keywords

contractdefendantdamagesappealtrialleasebad faith

contractbreach of contractplaintiffdefendanttrialwillleasegood faithbad faith

Related Cases

Groves v. John Wunder Co., 205 Minn. 163, 286 N.W. 235, 123 A.L.R. 502

Facts

In August 1927, Groves owned a 24-acre tract of land in Minneapolis, which was leased to the John Wunder Company for the removal of sand and gravel. The contract required the defendant to leave the property at a uniform grade after extraction. However, the defendant breached the contract by only removing the best gravel and failing to leave the property in the required condition. The trial court found that the cost to complete the work was over $60,000, but awarded Groves only $12,160 based on the property's value at the time of the breach, which Groves contested.

In August, 1927, Groves and defendant made the involved contract. For the most part it was a lease from Groves, as lessor, to defendant, as lessee; its term seven years. Defendant agreed to remove the sand and gravel and to leave the property ‘at a uniform grade, substantially the same as the grade now existing at the roadway * * * on said premises, and that in stripping the overburden * * * it will use said overburden for the purpose of maintaining and establishing said grade.’

Issue

The main legal issue is whether the measure of damages for the breach of the construction contract should be based on the reasonable cost of completing the work or the difference in the property's value before and after the breach.

The one question for us arises upon plaintiff's assertion that he was entitled, not to that difference in value, but to the reasonable cost to him of doing the work called for by the contract which defendant left undone.

Rule

The court ruled that where a contractor's breach of a construction contract is wilful, he is not entitled to the benefits of substantial performance, and damages should be measured by the reasonable cost of completing the work left undone.

Where the contractor's breach of a building or construction contract is wilful, that is, in bad faith, he is not entitled to any benefit of the equitable doctrine of substantial performance.

Analysis

The court applied the rule by determining that the defendant's breach was wilful and in bad faith, thus disqualifying them from claiming any benefits of substantial performance. The court emphasized that the damages should reflect the reasonable cost of completing the work, which was significantly higher than the value of the property as it stood after the breach. This approach aligns with the principle that the injured party should be compensated for the loss of the promised performance.

That is not allowable. Here the rule is well settled, and has been since Elliott v. Caldwell, 43 Minn. 357, 45 N.W. 845, that, where the contractor wilfully and fraudulently varies from the terms of a construction contract, he cannot sue thereon and have the benefit of the equitable doctrine of substantial performance.

Conclusion

The Minnesota Supreme Court reversed the lower court's judgment and ordered a new trial, stating that Groves was entitled to recover the reasonable cost of completing the work as damages.

The judgment must be reversed with a new trial to follow.

Who won?

Frank M. Groves prevailed in the appeal as the court ruled in his favor, emphasizing that he should be compensated based on the cost of performance rather than the diminished value of the property.

Defendant's breach of contract was wilful. There was nothing of good faith about it.

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