## Facts

- A contractor agreed orally to remodel homeowners’ residence on a time-and-materials basis with an estimate and an implied obligation to perform in a good and workmanlike manner.
- The contractor furnished labor and materials and claimed a total of $5,090.86; the homeowners paid $1,997.51 and refused to pay the balance due to defective work.
- Defects included multiple aspects of the remodel (including roof, floors, walls, and chimney), requiring corrective work to restore the home to a good and workmanlike condition.
- In an earlier appeal, the contractor was held not to have substantially performed and therefore could not foreclose a mechanic’s lien; the case was remanded to assess the homeowners’ damages for breach.
- On remand, the trial court took no additional evidence and decided the matter on the existing record and exhibits.
- The trial court found homeowners’ repair damages of $2,494.50 and treated those damages as a setoff against the contractor’s claim, entering a net judgment for the contractor of $598.85 (plus interest and costs).

## Issues

1. Whether the trial court properly complied with the appellate mandate to assess the homeowners’ damages and enter judgment accordingly.
2. What measure of damages applies when remodeling work is defective and not performed in a good and workmanlike manner.
3. Whether lack of substantial performance (barring mechanic’s lien foreclosure) required denying the contractor any recovery, rather than allowing recovery reduced by the homeowners’ damages and prior payments.

## Decision

- The judgment on remand was affirmed.
- The trial court complied with the mandate by assessing the homeowners’ compensatory damages and entering a net judgment after setoff.
- Although the contractor could not enforce a mechanic’s lien due to lack of substantial performance, he could recover the value of labor and materials provided, reduced by (1) amounts already paid and (2) the homeowners’ repair damages.
- The homeowners’ damages were properly measured by the reasonable cost of repairs required to restore the residence to good and workmanlike condition.

## Legal Principles

- A mechanic’s lien may not be enforced when the underlying construction contract has not been substantially performed.
- Contract damages are limited to amounts that fairly compensate the injured party for loss caused by the breach.
- In defective-construction disputes, the owner’s damages are ordinarily the reasonable cost of repairs necessary to restore the work to the condition required by the contract, so long as the repair cost is not grossly disproportionate to the benefit obtained.
- Even without substantial performance sufficient for lien enforcement, a contractor may obtain compensation for value conferred (labor and materials) if reduced by the owner’s compensatory damages and prior payments, avoiding both owner windfall and total contractor forfeiture.

## Conclusion

The court upheld a net award to the contractor based on the value of labor and materials, offset by the homeowners’ prior payments and the reasonable cost to repair defects and restore the remodel to good and workmanlike condition, while reaffirming that lack of substantial performance bars mechanic’s lien foreclosure.


Nelson v. Hazel, 91 Idaho 850, 433 P.2d 120 (Idaho 1967)