Facts
- Home purchasers contracted with a builder/developer for construction of a house in a planned development.
- The contract required construction “substantially the same” as the model and office plans, which showed the house oriented for a southeast exposure.
- After contracting, the builder displayed a revised drawing showing a “mirror image” orientation (facing the opposite direction).
- The purchasers objected before and during construction and demanded construction consistent with the original orientation.
- The builder proceeded to construct and deliver the house in the reversed orientation, affecting wind exposure and view.
- The purchasers sued for breach of contract.
- After a bench trial, the circuit court found a breach but awarded no damages, finding reconstruction would be economically wasteful and noting the home’s market value had increased substantially.
- The district court affirmed breach but required cost-of-reconstruction damages, holding the economic-waste limitation did not apply to residential construction.
Issues
- What is the proper measure of damages for breach of a residential construction contract: cost to cure or diminution in value?
- Does the “unreasonable economic waste” limitation apply to residential construction contracts?
Decision
- The Florida Supreme Court disapproved the district court’s rule requiring cost-of-reconstruction damages for residential construction.
- The court adopted Restatement (First) of Contracts § 346(1)(a) as the general Florida rule for construction-contract damages.
- The court held the economic-waste limitation applies to residential and nonresidential construction alike.
- The case was remanded for application of the correct damages standard, including diminution in value where reconstruction would be unreasonable economic waste.
Legal Principles
- Damages for breach of a construction contract are generally the reasonable cost of completion or correction to conform to the contract, if feasible and not involving unreasonable economic waste.
- If curing the defect would require costs grossly disproportionate to the benefit, damages are limited to diminution in value: the difference between the value as contracted and the value as built.
- There is no categorical residential exception to the economic-waste limitation; the same damages framework applies to homes and other structures.
Conclusion
Florida applies a Restatement-based damages rule for construction breaches: owners may recover the cost to bring the work into conformity unless that remedy would cause unreasonable economic waste, in which case recovery is limited to any proven diminution in market value.