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ConstructionWebLinks.com
Sumrall
Church in Mississippi hired Johnson Electric to perform
electrical work under a $31,200 written contract. By the
time Johnson Electric had substantially completed, Sumrall
had paid $22,700 in progress payments. However, Sumrall
withheld the balance, claiming that the work was so poor
that it had to be repaired by another electrician (a congregation
member who may have been working on a volunteer basis).
Sumrall
alleged, for example, that Johnson Electric failed to install
19 circuit breakers in the breaker box with the result that
throwing a switch at one location (e.g. kitchen) turned
off switches in other locations (e.g. hall, restroom). Sumrall
also had to replace transformers and had to repair damage
to the ceiling around 25 light fixtures.
Johnson
Electric sued Sumrall for failure to pay. Sumrall counterclaimed,
alleging that Johnson Electric's shoddy workmanship was
such a material breach that Sumrall could terminate the
contract and withhold the balance owed on the contract.
At
trial, the jury awarded Johnson Electric $7,426 in compensatory
damages and $1,856.50 in attorney fees.
On
appeal, Sumrall argued that the judge incorrectly instructed
the jury about the law. Sumrall had requested that the judge
instruct the jury that it could not find in favor of Johnson
Electric if it found that Sumrall was forced to hire another
contractor because of Johnson Electric's poor workmanship.
Instead, the judge instructed that if repair work was required,
the jury should reduce the amount owed on the contract by
the cost of repairs. In addition to the jury instruction,
Sumrall also appealed the attorney fee award.
The
Court of Appeals affirmed as to damages. Sumrall Church
of The Lord Jesus Christ v. Johnson, 757 So.2d 311 (Miss.
App. 2000). When a contractor has substantially completed
its work, there are two ways to measure damages for any
faulty work: (1) cost of repair or (2) if repair is impracticable,
the diminished value of the property, i.e. value of the
property with defective work as compared with value of the
property with properly performed work.
The
Court of Appeals found that the cost measure should be used.
It rejected Sumrall's argument that the defective workmanship
constituted a material breach that allowed the church to
terminate the contractor and excused Sumrall from further
payment. It held there was no basis under the facts to terminate,
cancel or rescind the contract. The appellate court reasoned
that because Sumrall could do and actually did do repair
work, it could only reduce the amount owing on the contract.
The
Court of Appeals reasoned that because Johnson Electric
had substantially completed its work, Sumrall could not
withhold the balance by subsequently claiming that Johnson
Electric had materially breached and terminating the contract.
Instead, Sumrall could only deduct either repair costs or
the diminished property value from the balance owed. The
contractor, therefore, was entitled to be paid for its work
minus the cost of repairs or diminution in value. The Court
of Appeals summarized the rules of recovery as follows:
When
a contractor substantially performs the terms of the contract,
substantial performance will support recovery either on
the contract or on a quantum meruit basis. On the other
hand, depending on the nature of the breach, a recission
[sic] or cancellation of the contract may be justified.
If recission [sic] or cancellation is warranted, the contractor
is entitled to recover on a quantum meruit basis for the
work performed.
The
court did reverse the attorney fee award because there was
no attorney fee provision in the contract.
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