Question

The Taylors agreed to pay $400,000 to Arbutus Homes Inc. to build their new home, paying $200,000 in advance. Partway through the project, they discovered the builders had made many errors and significant deviations from the house plan in the original contract. After ejecting the builder from the property, they paid $300,000 to another builder to complete the project according to the plans. How much would the Taylors be awarded for expectation damages if they sued Arbutus for breach of contract?

a) $200,000
b) $100,000
c) $300,000
d) $400,000

Answer 1

The Taylors would likely be awarded $100,000 for expectation damages after suing Arbutus for breach of contract. This amount represents the extra money they had to pay beyond the original contract price of $400,000 to have their home completed as per the agreed plans.

Step-by-step explanation:

The question relates to the calculation of expectation damages in the event of breach of contract by a builder. Expectation damages are intended to put the injured party in the position they would have been in had the contract been fully performed. The Taylors originally agreed to pay $400,000 to Arbutus Homes Inc. for their new home and had already paid $200,000. However, they had to pay an additional $300,000 to another builder to correct errors and complete the project according to the original plans. The goal with expectation damages is to cover the cost of completion as well as any additional costs incurred because of the breach without double-counting or unjust enrichment.

In this case, the Taylors would be awarded the additional amount they had to pay on top of the original contract price, which is $100,000. They agreed to a $400,000 home but ended up paying $400,000 + $300,000 = $700,000. The $200,000 they paid originally to Arbutus Homes Inc. was part of the agreed price and doesn't constitute damages. Therefore, the expectation damage would be the difference between what they ended up paying ($700,000) and what they originally agreed to pay ($400,000), which is $300,000; however, since they were already obliged to pay an additional $200,000 according to the original agreement, the actual damages would be $100,000.