Economic waste and limitations of damages for construction defects

posted by Michael Fortney  |  Sep 2, 2011 08:19 AM in Construction Law

Ohio law on contract damages provides that the damages for defective construction are limited to the cost of the repair of the defective construction, unless the cost to repair is grossly disproportionate to the benefit obtained by the repair.  Ohio cases hold that:

  • Generally, the proper measure of damages for breach of a construction contract is the cost of repair. See Ohio Valley Bank v. Copley (1997), 121 Ohio App.3d 197, 210, citing 5 Corbin on Contracts (1964), Section 1089.
  • The proper measure of damages is the reasonable cost of placing the structure in the condition contemplated by the parties at the time they entered into the contract. See Hansel v. Creative Concrete & Masonry Constr. Co. (2002), 148 Ohio App.3d 53, 59.
  • “[I]f repair would lead to unreasonable economic waste, damages are measured by the difference in market value between the structure as contracted for and the structure as received." Angles v. West, Pickaway App. No. 02CA16, 2003-Ohio-464, ¶9, citing Ohio Valley Bank
  • Economic waste exists when the cost to remedy the defect is grossly disproportionate to the good to be attained. See Capstone Homes, Inc. v. Ruffin (Apr. 13, 2001), Greene App. No. 2000-CA-101; Toth v. Spitzer (Dec. 18, 1998), Montgomery App. No. 17178.  

Consequently, the court in Hansel v. Creative Concrete & Masonry Constr. Co. determined that, where a newly constructed drive experienced “cracking, scaling, and pitting,” “misplacement of the wire mesh and an uneven subbase,” and “a range of thickness of the concrete of 3.4 to 4.6 inches [where] . . . the contract called for a thickness of 4.5 inches,” the contractor had substantially performed under the contract, and the owner was not entitled to replacement of the drive.  The court reasoned that:

while appellants did not receive exactly what they bargained for, the driveway still met its essential purpose.  There was no testimony that the driveway was unusable or would become so in the near future.  Pictures admitted at trial showed some surface defects, but the driveway was clearly useable.

Id.

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