Case Study: Breach of Contract in a Construction Agreement

This case study examines a breach of contract in a construction scenario, focusing on the dispute between Chris, the painter, and John, the homeowner. The analysis identifies the alleged breach of contract, specifically the failure to meet the 'satisfactory' completion term. It explores the legal definitions of breach of contract, performance of contract, and the concept of 'satisfaction' within contractual agreements. The document details the types of damages that could be awarded, including direct and consequential damages, and considers the legal status of restitution claims. Furthermore, the case study analyzes whether Chris can claim additional money and if he can escape the entire obligations rule. It explores the potential for specific performance, injunctions, and the implications for a third party, Peter. The legal positions of John and Peter are also discussed, including whether John can prevent Peter from working for a rival. The document concludes with a thorough examination of relevant case law and legal principles related to contract law in construction disputes.

1. Identify the alleged breach of contract, i.e. what term in the
contract may have been broken.
a) What is Performance of Contract?
The term ‘Performance of contract’ means that both, the promisor, and the promise
have fulfilled their respective obligations, which the contract placed upon them. For
instance, A visits a stationery shop to buy a calculator. The shopkeeper delivers the
calculator and A pays the price. The contract is said to have been discharged by mutual
performance. (http://accountlearning.com/performance-of-contract-meaning-
types-of-performance/)
b) Definition of Breach of contract
I. Failure, without legal excuse, to perform any promise which forms the
whole or part of contact.
(Black’s Law Dictionary page No. 235).
II. If the one of the parties to a contract fails to perform as required by the
contract, this may constitute a breach of contract. A breach of contract may
entitle the innocent party to make a claim for damages for the losses it has
suffered. If the breach of contract is serious (a material breach), then the
innocent party may also consider that it is discharged from any further
obligations under the contract.
(https://www.designingbuildings.co.uk/wiki/Breach_of_contract)
C) Analytical and legal view of this case.
Breach of Contract in Construction Contract
i. Defective workmanship
The House of Lords held that the owner could recover damages for
defective work even though the owner suffered no actual damages as the
building have been sold for full value before the damage was discovered.
(Lindon Guarden Trust vs Lenesta Sludge Disposal Ltd (1993) 3 AII
ER 417.)
ii. Failure on the part of contractor

The overwhelming majority of claims for breach of construction contract
involve cases where a contractor fully performs the contract but the work
allegedly contains defects. Construction defect claims give rise to a
variety of recoverable damages depending on the scope of the project,
the nature and extent of the defect, and the extent to which the defect
deprives the owner of use of its property or interrupts the owner’s
business. Construction projects vary enormously in scope, from a simple
residential remodeling project on the one end, to massive multi-billion
dollar public works projects on the other end. Regardless of the type or
scope of construction project involved, construction defect damages
consistently fall within either one of two categories: (1) direct damages,
composed of the loss in value to the non-breaching party of the other
party’s performance caused by its failure or deficiency; and (2)
consequential damages caused by the breach. In rare cases, punitive
damages are recoverable, but only when the breach of contract is
accompanied by a violation of traditional common law duties, such as
fraud or conversion (http://www.lawcjb.com/breach-of-contract-claims-
in-construction-cases/)
E) The Term “Satisfactory” have been broken in this contract.
The Chris was agreed to get the arrears amount on satisfactory completion of the
work. Mr. John was not satisfied with the work of Chris so he rejected the work
and alleged that the painting was substandard.
i. Legal analysis of word satisfaction.
A contract may be contingent upon the satisfaction of the other party.
The measuring of satisfaction can be explained in contract.
It was said where a contract is required to be done to the satisfaction
of one of the parties, the meaning necessarily is, that it must be done in
a manner satisfactory to the mind of a reasonable man.
(Keeler v. Clifford, 165 Ill. 544, 46 N.E. 248 (1897)
2. Considered Damages awarded to John

In breach of this contract the following damages may be awarded to the John
 Direct Damages: In construction defect cases, as with any defective
performance case, the difference between the value to the injured party of the
performance that it should have received and the value of what, if anything, it
actually did receive is recognized by contract law as the loss in value.
 Consequential Damages: An award of damages at common law in a contract
action is designed to place non-breaching parties in the position they would have
enjoyed had the contract been performed.
 Schedule Related Damages: Timely completion of large construction projects
depends upon the correct sequencing and interfacing of the work of numerous
contractors and trades.
 Owner Delay Claims: If a contractor is at fault for a delay in construction of
the project, the owner may seek redress under several damage theories. Generally,
an owner’s consequential damages arising from delay by a defaulting contractor
cover:
Delays in completion of construction projects may result in various consequential
damages that are not amenable to proof.
 Contractor Delay Claims: A delay claim is the most common action asserted
by contractors to recover additional costs incurred on a project. A contractor may
bring a traditional delay claim against another contractor or owner whose acts or
omissions caused the contractor’s work to be delayed.
Inducement is the cornerstone of a claim for acceleration, and absent inducement,
a mere acceleration does not entitle a party to recover damages.
(http://www.lawcjb.com/breach-of-contract-claims-in-construction-cases/)
3. Can John Claim the restitution claim to recover the 1000 he
has already paid.
a) legal status of the Restitution claim
The law of “restitution of unjust enrichment” (to give it its full title was given its first
modelling by Lord Goff and Professor Jones in 1996 and based broadly on the US
Restatement of Restitution of 1939. As is apparent from many of the speeches of Lord

Goff in the House of Lords, his lordship was concerned to promote e ‘justice’ in his
Judicial work over -and -above formalism in rules, for example, as to the award of
compound interest and to permit equitable responses only where the applicant had
acted ethical (Birks, 1998, 29., Tinsley v Milligan [1994] 1 AC 340).
b) John Claim the Restitution to recover his advance amount
John can claim the restitution of a wrong doing of Chris in the light of
following research.
Restitution for wrongdoing
It is a centerpiece of the law of restitution as applied to obligations that it effects
disgorgement of any benefit taken by a defendant as a result of the commission of a
wrong. This wrongdoing may apply to equitable wrongdoing: including undue
influence, constructive trusts imposed on fiduciaries in relation to secret profits,
constructive trusteeship imposed on strangers to a trust, and so forth. Where a
contract is entered into by means of undue influence, the contract is rescinded. The
rescission of the contract requires the restoration of any property to the claimant
which had been transferred under the terms of that rescinded contract. On this basis,
the remedy is said to be restitutionary. The discretionary aspect to the remedy –
similar to the equitable remedy of account – arises when the claimant has taken
some benefit from the rescinded contract: it is this discretionary aspect which
underlines the equitable heritage of the constructive fraud canon.
(Jaffey, 2000, 363.53 Virgo, 1999, 518 et seq.54 Considered in chapter 20. 55 Para
12.5. 56 Para 12.5. 57 O’Sullivan, 1998, 42; Virgo, 1998, 70. 58 McGhee, 2000,
610 et seq)
4. Can Chris claim any more money from John?
a) Grounds for claiming more money
i) Yes, He can demand if he has performed his part of performance well.

Mr. Chris has not performed well his part of contract because the owner John
was not happy and satisfy with his work at all and he asked to do it again it
means the contract was not completed.
ii) He is not entitled to claim damages.
a) No full part of performance
b) No satisfactory deliver
c) No conclusion of contract.
5. If he has not painted the wall properly, he will not have
performed his contractual obligations precisely and exactly.
Can he bring himself within an exception to the entire
obligations rule?
i) Legal Status of the contract
Contract was not performed properly by the Chris and no one can say that
the contract was completed (we have discussed in detail in above pages)
ii) Performance of the Chris
It was the duty of the Chris to satisfy Mr. John but he was not satisfied with
the performance of Mr. Chris.
iii) Obligations of the Chris
a) Satisfactory completion of the work
He did not perform well and John was not satisfied with his work (we
have discussed in detail the term satisfaction. Every contractor can
discharge through performance.
b) Substantial performance
A further exception exists where a court is satisfied that substantial
performance is present. The court may then award the contractually agreed
price and deduct sums to reflect the amount not performed. If however, the
performance is not held to amount to substantial performance the claimant

is entitled to nothing. Difficulty arises as to what amounts to substantial
performance. There is no precise limit set down but is to be determined on
the facts of individual cases.
Hoenig v Isaacs [1952] 2 All ER 176 Court of Appeal
The claimant agreed to decorate and furnish the defendant's flat for £750
payable by two instalments and the balance on completion. The claimant
completed the work but the defendant was unsatisfied some of the
furnishings and refused to pay the all the final instalment. The cost of the
defects in the furniture came to £56.
Held:
The claimant had substantially performed the contract and was therefore
entitled to the contractually agreed price minus the cost of the defects.
iv) He Can’t bring himself within an exception to the entire obligations rule
In above full discussion it has been proved that he is cannot escape himself
6. If Chris’ work is not defective and he has completed his
obligations then John is in breach for refusing to pay him.
What action could Chris bring to recover the money due to him?
a) Recovery of arrears and performance of contract.
If Chris succeed to prove that his work was not substandard and defective, He can
file suit for recovery of the arrears.
Bolton v Mahadeva [1972] 1 WLR 1009 Court of Appeal
The claimant installed central heating in the defendant's home. The agreed contract
price was £560. The defendant was not happy with the work and refused to pay.
Defects in the work amounted to £174. The action by the claimant to enforce the
payment failed since the court held there was no substantial performance.
The legal position of John and Peter
Can John stop him working for his rival?

1. Consider specific performance.
What is Specific Performance?
Generally, a party cannot obtain specific performance of personal service contracts or
employment contracts. However, breach of a service or employment contract can
subject the breaching party to a suit for damages.
Peter Case.
In my view he has not breached the contract because, the projected was once completed
and he was not bound and responsible to defective work of Mr. Chris.
Discharged by Frustration
A contract may be discharged by frustration. A contract may be frustrated where
there exists a change in circumstances, after the contract was made, which is not the
fault of either of the parties, which renders the contract either impossible to perform or
deprives the contract of its commercial purpose. Where a contract is found to
be frustrated, each party is discharged from future obligations under the contract and
neither party may sue for breach. The allocation of loss is decided by the Law Reform
(Frustrated Contracts) Act 1943.
2. Consider an injunction.
Injunctions
Injunctions are another form of an equitable remedy available only at the
discretion of the judge. There are three types:
1. Interlocutory or interim (temporary injunction until a court hearing)
2. Prohibitory (a court order that a party must not do something)
3. Mandatory (an order that a party must do something)
a) Page One Records v Britton [1968] 1 WLR 157
The claimant record company, owned by Larry Page, was the manager of the pop
group, The Troggs. By contract, The Troggs agreed that Page One Records would be
their manager and sole agent for 5 years in return for 20% of their profits. By a term
of the contract The Troggs agreed not to appoint anyone else for the duration.
However, their relationship with Larry Page broke down and The Troggs wrote a

letter to the claimant seeking to terminate the contract. The claimant sought an
injunction to prevent The Troggs appointing a new manager.
Held:
The injunction was refused. To grant an injunction would be akin to ordering
specific performance of a contract for personal services since the effect of the
injunction would be to compel The Troggs to continue to employ the claimant or not
work at all
b) Legal relief
No legal relief is available to John.
3. Consider damages if Peter does not work for John and he has to pay a replacement
project manager more than he would have paid Peter.
a) Whether damages occur to the John
No damages can be claimed by John because Peter has perform his part of
contract