## Facts

- A contractor and homeowners entered a written agreement for extensive residential alterations for a lump-sum price of $3,075.
- The contract set progress payments of $150 on signing, $1,000 on delivery of materials and start of work, $1,500 on completion of rough carpentry and plumbing, and $425 on completion.
- The contractor began performance, delivered materials, and received the first two payments.
- After rough carpentry and plumbing were completed, the homeowners refused to pay the $1,500 installment.
- The contractor stopped work and sued seeking the unpaid $1,500 installment.

## Issues

1. Whether a lump-sum construction contract with staged progress payments is an entire contract or a divisible contract.
2. If the owners materially breach by refusing a progress payment, whether the contractor’s recovery is limited to the missed installment or is measured by expectation damages based on the whole contract.

## Decision

- The Court of Appeals held the contract was entire, not divisible.
- The progress-payment schedule was treated as part payments of a single contract price, not separate prices for separable portions of work.
- The proper contract-damages measure on the owners’ breach was the contract price minus amounts already paid and minus the cost of completing the work.
- The court rejected limiting recovery to the single unpaid installment merely because payment was tied to a work stage.

## Legal Principles

- A progress-payment clause does not, by itself, make a lump-sum construction contract divisible.
- An “entire” contract is indicated where one overall project is exchanged for a single total price, even if payment is scheduled in installments for convenience.
- When an owner materially breaches an entire construction contract by refusing a required payment, the contractor may seek:
  - expectation damages measured as contract price minus payments received and minus cost of completion; or
  - quantum meruit for the reasonable value of work performed (as an alternative remedy theory).

## Conclusion

The court treated the staged payment terms as a financing device within a single bargain for an alteration project and held that the contractor’s contract remedy for the owners’ refusal to pay was not the missed installment, but the benefit-of-the-bargain measure based on the entire contract price less payments received and the cost of completion.


New Era Homes Corp. v. Forster, 299 N.Y. 303, 86 N.E.2d 757 (N.Y. 1949)