Must damages be based on the cost of repair at the time of the breach? What is the time of breach? A recent Florida appellate case might have the answer to these questions. Bandklayder Development, LLC v. Sabga[1] introduces key principles regarding damages for construction defects. The Florida appellate case found that damages must be based on the cost of repair at the time of breach and not the current repair costs at the time of trial. This ruling may provide clarification on the issue of the time of breach in relation to other breach of contract matters, such as first-party property claims, construction defect claims, and landlord tenant disputes.
Trial Court’s Decision
In Bandklayder, the Developer built a high-end single-family residence in Coconut Grove and sold it to the Purchasers, Mr. and Mrs. Sabga, in June 2017, with an agreement to provide the Purchasers with a one-year workmanship warranty to fix any construction defects following a walk-through. Despite agreeing to address these issues, the Developer failed to make repairs, prompting the Purchasers to issue a defect notice in April 2018. When the Purchasers sued for breach of contract, their expert testified that the repair costs as of January 2022 were $435,936.75, with a 35% increase to May 2023 due to rising construction costs. However, the expert did not provide estimates for the cost of repairs as of the breach date in June 2017 or April 2018. The trial court ruled in favor of the Purchasers, awarding them $425,936.75 in damages based on the expert's trial testimony. The below graph highlights he relevant dates that arose during the claim.
The Appellate Court's Decision to Reverse
The Developer appealed, arguing that damages should have been measured as of the breach date (June 2017 or April 2018) rather than later dates used in the trial (January 2022 and May 2023). The appellate court agreed, ruling that the trial court erred by awarding damages based on the trial date instead of the breach date. Citing Grossman Holdings Ltd. v. Hourihan[2] and Florida law, the Third DCA reaffirmed that contract breach damages should be determined at the time of the breach, unaffected by later value fluctuations. Grossman adopted the Restatement (First) of Contracts section 346(1)(a) on measuring damages for defective construction.
Subsection 346(1)(a) of the Restatement (First) of Contracts
Subsection 346(1)(a), therefore, is designed to restore the injured party to the condition he would have been in if the contract had been performed. Subsection 346(1)(a) of the Restatement (First) of Contracts (1932) states the following:
For a breach by one who has contracted to construct a specified product, the other party can get judgment for compensatory damages for all unavoidable harm that the builder had reason to foresee when the contract was made, less such part of the contract price as has not been paid and is not still payable, determined as follows:
- For defective or unfinished construction, he or she can get judgment for either
- the reasonable cost of construction and completion in accordance with the contract, if this is possible and does not involve unreasonable economic waste; or
- the difference between the value that the product contracted for would have had and the value of the performance that has been received by the plaintiff, if construction and completion in accordance with the contract would involve unreasonable economic waste.
Date of Breach is Flexible
The Third DCA acknowledged some flexibility in determining the breach date but emphasized that if no evidence of damages at the time of breach is presented, the court should not award damages based on speculation. Therefore, Plaintiff must provide evidence at the time of breach for the claim to survive any later challenge.
Plaintiff Must Meet its Burden
Plaintiff’s failure to meet its burden of establishing the correct measure of damages at trial, and such failure is not a result of the trial court, the party is not entitled to a new trial on damages. Therefore, the Plaintiff has the burden of establishing the correct measure of damages at trial. Additionally, Bandklayder held that if the Plaintiff fails to meet its burden, the court should not award damages based on speculation. Therefore, the Third DCA reversed and remanded directing the trial court to enter a judgment in favor of the Developer and that the Purchasers take nothing.
Bandklayder Ruling Applied to First Party Property Disputes.
The ruling in Bandklayder may have implications for first-party property disputes, where litigation often centers on the date of loss and the amount of damages. In these cases, defendants typically raise the argument that the alleged date of loss aligns with the breach, while plaintiffs contend otherwise. Plaintiffs frequently submit multiple, increasing estimates throughout the case, making settlement negotiations complex as defendants work to determine the accurate damages amount. Additionally, first-party property cases require a notice of intent to litigate; however, if plaintiffs lack definitive damages estimate at that time, they are not obligated to provide one, creating further uncertainty. Applying Bandklayder, which holds that contract breach damages should be fixed at the time of breach and not influenced by later value fluctuations, courts arguably should disregard repair estimates that reflect cost increases occurring after the alleged breach date.
[1] Bandklayder Dev., LLC v. Sabga, 50 Fla. L. Weekly D91 (Fla. 3d DCA January 2, 2025)
[2] Grossman Holdings v. Hourihan, 414 So. 2d 1037 (Fla. 1982)
