LEGAL PRINCIPLE: CONTRACT LAW – Measure of Damages – Application in Building Contracts
PRINCIPLE STATEMENT
The measure of damages in cases of breaches of contract by the employer gives little difficulty as a legal problem; builders work for profit and apart from entitlement to the price, damage caused by employer's breach will be assessed in light of its impact upon the builder's profit.
RATIO DECIDENDI (SOURCE)
"The measure of damages as a legal problem gives little difficulty in the cases of breaches of contract by the employer. It is obvious that builders work for a profit and apart from his entitlement to the price, the damage to a builder caused by any breach of contract by the employer will be assessed in the light of its impact upon his profit."
EXPLANATION / SCOPE
In building contracts, contractor damages for employer breach center on lost profit. Contractors enter contracts to earn profit beyond costs. When employers breach (wrongful termination, refusal to pay, prevention of performance), contractors lose expected profit. Damages assessment considers: contract price minus costs already incurred minus costs saved by not completing. This typically yields the profit the contractor would have earned. Additional heads might include: wasted expenditure, costs of demobilization, loss on materials purchased. The principle recognizes construction as a profit-making enterprise. Unlike some breach situations where damages calculation is complex, builder-employer breaches have straightforward profit-based measures. Courts examine contract terms, work completed, remaining work, and profit margins to assess impact on contractor’s economic position