Yurchak v. Jack Boiman Construction Co.
3 Ohio App. 3d 15, 3 Ohio B. 16, 443 N.E.2d 526 (1981)
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Rule of Law:
When a party commits a material breach of contract by substantially failing to perform its essential purpose, the non-breaching party is entitled to elect the remedy of restitution and recover any payments made under the contract.
Facts:
- On May 7, 1977, Michael Yurchak entered into a written contract with Jack Boiman Construction Company.
- Boiman agreed to waterproof Yurchak's basement for a total price of $3,200, with a guaranty that it would remain waterproof for ten years.
- Yurchak paid Boiman $2,400 of the total price before the job was completed.
- After Boiman finished the work, it rained, and Yurchak's basement leaked just as it had before the waterproofing attempt.
- Boiman made several subsequent attempts to repair the leaks but was unable to do so.
- The work performed by Boiman provided some minimal benefit, such as stopping some mud from oozing into the basement.
Procedural Posture:
- Michael Yurchak sued Jack Boiman Construction Company and Jack Boiman in the trial court for breach of a guaranty.
- The defendants filed a counterclaim for the unpaid balance of the contract.
- The case was tried before a jury, which returned a verdict in favor of Yurchak and awarded him $2,000.
- The trial court overruled the defendants' motion for a directed verdict.
- The defendants (appellants) appealed the trial court's judgment to the intermediate appellate court.
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Issue:
Does a party's substantial failure to perform the essential purpose of a contract, such as waterproofing a basement, entitle the non-breaching party to recover payments made under that contract?
Opinions:
Majority - Per Curiam
Yes. A party's substantial failure to perform the essential purpose of a contract entitles the non-breaching party to recover payments made under that contract. The court reasoned that the controlling fact was that Yurchak bargained and paid for a watertight basement, which he did not receive. This failure by Boiman constituted a substantial nonperformance and a material breach of the contract, as it failed to achieve the ultimate object of the agreement. When such a material breach occurs, the non-breaching party is not limited to suing for damages (their expectancy interest) but may also choose the remedy of restitution to recover benefits conferred upon the breaching party, such as payments made. This right to restitution is well-established and serves to return the innocent party to the position they were in before the contract was made.
Analysis:
This case serves as a clear illustration of the alternative remedies available for a material breach of contract. It reaffirms the principle that a non-breaching party can elect between expectancy damages (the benefit of the bargain) and restitution (recovering what was paid). The decision emphasizes that for restitution to be available, the breach must be substantial and go to the 'essence' of the contract. This provides a practical remedy for plaintiffs, especially when proving expectancy damages might be more complex than simply proving the amount they paid for a performance that ultimately failed.
