Nelson v. Hazel
91 Idaho 850, 433 P.2d 120, 1967 Ida. LEXIS 276 (1967)
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Rule of Law:
A contractor who breaches a building contract by failing to substantially perform is still entitled to recover in quasi-contract for the value of the labor and materials that conferred a benefit upon the homeowner, less the homeowner's damages for the cost of repairing the defective work.
Facts:
- Nelson, a contractor, entered into a contract with the Hazels to remodel their home.
- Nelson performed labor and provided materials for the remodeling project.
- Upon completion, the work contained numerous defects, including issues with the roof, floors, walls, and a chimney.
- The Hazels had paid Nelson $1,997.51 of the total $5,090.86 charge for labor and materials.
- Expert witnesses testified that the defects in Nelson's construction work were remediable.
- The experts estimated the cost to repair the defects would be between $2,000.00 and $2,300.00.
Procedural Posture:
- Nelson (contractor) sued the Hazels (homeowners) in the district court (trial court) to foreclose a mechanic's lien.
- The trial court found that Nelson had substantially performed and entered judgment in his favor.
- The Hazels, as appellants, appealed to the Idaho Supreme Court.
- In the first appeal, the Supreme Court reversed the trial court, holding that Nelson had not substantially performed the contract.
- The Supreme Court remanded the case to the trial court with instructions to assess the damages sustained by the Hazels due to Nelson's breach.
- On remand, the trial court calculated that Nelson was entitled to recover for his labor and materials, less a set-off for the Hazels' repair costs and prior payments, resulting in a net judgment for Nelson.
- The Hazels, as appellants, appealed the trial court's judgment on remand to the Idaho Supreme Court for a second time.
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Issue:
In an action for breach of a building contract where the contractor has not substantially performed, may the contractor recover for the value of labor and materials provided, less the homeowner's damages for the cost of remedying the defective work?
Opinions:
Majority - Smith, Justice
Yes. A contractor who has not substantially performed a building contract may still recover for the value of the benefit conferred, less the homeowner's damages. While the general rule prevents a defaulting party in a contract action from recovering, building contracts are a recognized exception. This exception is based on the principle of preventing unjust enrichment, as the homeowner would otherwise retain the value of the improvements in excess of the damages caused by the contractor’s breach. Even where performance is not substantial, the weight of authority allows a negligent contractor to recover for the benefits actually conferred to avoid a forfeiture. The proper measure of recovery is quasi-contractual: the value of the labor and materials provided, less a set-off for the homeowner's damages, which are typically the cost of completing or correcting the performance.
Analysis:
This decision solidifies the application of quasi-contract and unjust enrichment principles to building contracts in Idaho where substantial performance is lacking. It moves away from a strict contractual forfeiture rule, which would bar any recovery for a breaching contractor, toward a more equitable remedy. The case establishes a clear framework for calculating damages that balances the homeowner's right to receive the benefit of their bargain (by deducting repair costs) with the contractor's right to be compensated for any net benefit conferred. This approach ensures that neither party receives a windfall and will guide lower courts in resolving similar construction disputes.
