## Facts

- DeLawrence and Lillian Beard contracted with S/E Joint Venture (a builder and a licensed real estate agent) for construction and conveyance of a completed residence on a subdivision lot for \$785,000.
- The March 17, 1986 contract stated the purchasers were buying a completed dwelling and that the seller was not acting as the purchasers’ contractor.
- The contract projected completion by November 30, 1986, was contingent for 90 days on the purchasers’ sale of two residences, and contained a clause permitting the sellers, in their discretion, to cancel and return the deposit if performance was not possible within 365 days.
- By roughly two months into the project, the sellers knew they could not meet the scheduled completion date but did not disclose this for many months while the purchasers attempted to sell homes in reliance on the contract.
- On March 16, 1987, the sellers terminated under the 365-day clause.
- The purchasers sued for specific performance or damages, including loss-of-bargain damages tied to market appreciation.
- During the litigation, the sellers filed Chapter 11; the bankruptcy court approved rejection of the executory contract on June 17, 1988, making specific performance unavailable.

## Issues

1. Whether purchasers in a contract to construct and convey improved real estate are limited to out-of-pocket (reliance) losses when the vendors breach.
2. Whether purchasers may recover benefit-of-the-bargain damages where the breach is not a title-defect inability to convey.
3. If benefit-of-the-bargain damages are available, whether valuation may treat the property as improved as promised and use the date specific performance became unavailable (bankruptcy rejection) rather than the earlier termination/repudiation date.

## Decision

- The Court of Appeals of Maryland held that purchasers’ damages were not limited to out-of-pocket losses and could include benefit-of-the-bargain damages.
- The court rejected applying the title-defect damages limitation associated with the Flureau line of cases because the breach was unrelated to inability to convey good title.
- The court held the property could be valued as if improved as promised.
- The court held valuation could be measured as of the date specific performance became unavailable due to bankruptcy-court-approved rejection, rather than the earlier termination date.
- The court reversed the damages limitation imposed below and remanded for recalculation consistent with these rulings.

## Legal Principles

- Standard contract damages protect the expectation interest by placing the injured party in as good a position as if the contract had been performed.
- The Flureau-type limitation restricting purchasers to reliance damages is confined to good-faith failures to convey marketable title and does not govern breaches unrelated to title.
- A vendor’s lack of good faith in performance supports ordinary expectation damages rather than restricted reliance recovery.
- When a purchaser seeks specific performance but later cannot obtain it, substitutionary damages may be measured at the time specific performance becomes unavailable.
- In a build-and-convey contract, benefit-of-the-bargain damages may be calculated using the value of the promised improved property, including appreciation occurring before the remedy becomes impossible.

## Conclusion

The court held that purchasers under a contract to build and convey a residence could recover benefit-of-the-bargain damages, valuing the property as improved as promised, and that the appropriate valuation date was when specific performance became unavailable because the contract was rejected in bankruptcy.


Beard v. S/E Joint Venture, 321 Md. 126, 581 A.2d 1275 (Md. 1990)