What is the Measure of Damages for Breach of Construction Contract?

The measure of damages for breach of a construction contract is the reasonable cost of construction and completion in accordance with the contract. Magnum Constr. Mgmt. Corp. v. City of Miami Beach, No. 3D15-2239, 2016 WL 7232268, at *4 (Fla. 3d Dist. Ct. App. Dec. 14, 2016). Damages cannot be based upon speculation or guesswork, but must have some reasonable basis in fact.

In Magnum Constr. Mgmt. Corp. v. City of Miami Beach, Magnum Construction Management (“MCM”) appealed from a trial court ruling in favor of the City of Miami Beach, Florida (“City”).  MCM contracted with the City to construct a new park (“the Project”).  After completion, the City found several defects in the soil compaction and landscaping of the Project.

In fixing the landscaping issues, the City fundamentally changed the landscaping.  The City sought 3 million dollars in damages against MCM, which was the cost of the new construction.  The trial court found that the new construction constituted “betterments” or upgrades to the original plans.  The trial court awarded the City $1,290,037, stating that the difference between its total award and the amount sought by the city constituted a betterment.

On appeal, the Third District Court of Appeal of Florida reversed the award of damages holding that the measure of damages was the reasonable cost of construction and completion in accordance with the contract.  Where an owner elects to adopt a more expensive design in making the repairs, the owner is limited to recovery of what would have been the reasonable cost of repairs according to the original design.  The trial court was correct to exclude betterments from its award, but the City did not cite any evidence as to the value of the betterments, or what it would have costed the City to restore the playground to the condition it would have been in if the contract had been performed.  The trial court could not speculate as the value of betterments.  Damages cannot be based upon speculation or guesswork, but must have some reasonable basis in fact.

Accordingly, when a non-breaching party corrects the defects of a contractor, the party must keep in mind that any improvements or betterments that radically differ from the original design of the project will not be recoverable in court.