## Facts

- Hubbell Homes, L.C., a builder-seller, entered a purchase agreement to sell a newly built home to Billy Michael Key and Donna Elizabeth Powers Key for $376,900 with a delayed closing.
- The parties also executed a dwelling unit rental agreement for October 2, 2006 through September 30, 2007, giving the Keys an option to purchase and giving Hubbell a “put” option to require closing at lease-end.
- In July 2007, Mike Key lost his job; Hubbell later notified the Keys it would exercise the put option to require closing.
- The parties executed a modification extending the lease to December 31, 2007; the Keys sought seller financing or a contract sale, which Hubbell declined.
- The Keys did not purchase and vacated the home in early January 2008.
- Hubbell listed the home for $376,900 and later accepted a $350,000 offer subject to a contingency; the contingency failed and the sale did not close.
- Hubbell sued for breach, seeking lost-profit damages and other losses; after a bench trial, the district court awarded general damages of $26,900 (contract price minus inferred market value of $350,000) plus limited incidental damages.

## Issues

1. What is the proper measure of general damages for a buyer’s breach of a real estate purchase agreement: contract price minus fair market value at breach, or that amount plus additional lost profits for a builder-seller?
2. Under what conditions may lost profits be awarded in a contract action, and were those conditions satisfied on this record?
3. Whether an unconsummated but accepted, contingent $350,000 offer could support the court’s finding of fair market value.

## Decision

- The Iowa Court of Appeals affirmed the judgment.
- The court upheld the general damages award of $26,900, calculated as the contract price ($376,900) minus fair market value ($350,000).
- The court declined to award Hubbell the additional lost-profit amount it sought.
- The court rejected the Keys’ cross-appeal challenges to the damages determination and incidental items awarded.

## Legal Principles

- Expectation damages aim to place the injured party in the position it would have occupied had the contract been performed.
- For breach of a real estate purchase contract, general damages are typically measured by the difference between the contract price and the property’s fair market value at the time of breach.
- Lost profits may be recoverable when they were within the parties’ contemplation and can be proven with reasonable certainty, but they are not recoverable to the extent they duplicate the benefit already captured by the standard expectancy measure.
- In a builder-seller transaction, the builder’s expected profit is ordinarily reflected in the contract price; the contract-price-minus-market-value formula generally compensates that expectancy without a separate profit award.
- A court may rely on market evidence developed after breach, including an accepted offer, to support a fair market value finding when the record supports that inference.

## Conclusion

The court held that Hubbell’s recovery for the Keys’ failure to close was properly limited to the traditional real estate expectancy measure—contract price minus fair market value—plus proven incidental damages, and that an additional lost-profit award was not warranted because it would duplicate the expectancy recovery and was not established as a distinct, reasonably certain loss.


Hubbell Homes, L.C. v. Key, 786 N.W.2d 519 (Iowa Ct. App. 2010)