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Recent Rulings Jager Law is Working On |
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Measure of Damages in Construction Defect Cases July 1, 2005 Crest Inc. v. Costco Wholesale Corp., No. 53364-9-I (Court of Appeals, Division I, July, 2005) Short principles:
A general contractor, Barclay Dean Construction ("BD"), entered into a contract with Crest Incorporated ("Crest"), whereby Crest agreed to provide "supervision, materials, labor, supplies and equipment" for the installation of concrete in a Costco store. Under Crest's contract with BD, Crest was not to add water to the concrete once it arrived on the project site. Although Crest was aware of this requirement, water was added to at least one truckload. After Crest poured the concrete, Crest began cutting control joints in the slab to control the location of shrinkage cracks. This process usually causes most cracking to occur within the joints and not on the slab surface. Crest used a conventional cut although the contract required an "early entry saw cut" system. The contract also required Crest to align the control joints. This was not accomplished. Crest also failed to utilize a water cure or a chemical cure. Random cracking began to appear on the slab shortly after Crest completed its work. BD rejected the slab and ordered Crest to remove and replace it with a properly poured slab pursuant to the express terms of the contract, which provided that if the slab was defective, it must be replaced. Crest argued that the slab could be repaired without the expense of removal and replacement. After extensive negotiations, Crest removed and replaced the slab. BD subsequently refused to make final payment to Crest or to pay Crest for the cost of repairing the slab. Crest sued for breach of contract. The trial court found that Crest was not entitled to recover for the cost of removal and replacement of the slab, stating that Crest was obligated to properly cure the cement slab and that its failure to do so was a material breach. Division I of the Court of Appeals upheld the trial court's decision that Crest materially breached its contract and that BD was entitled to the replacement of the slab, noting that its decision protected the "expectation interest" of both Costco and BD. The Court rejected Crest's argument that the cost to repair (versus the cost to remove and replace) was the proper measure of damages under Eastlake Construction Co. v. Hess, 102 Wn.2d 30, 47, 686 P.2d 465 (1984), which held that an injured party in a construction contract may recover either the diminution in the market price of the property caused by the breach, or the reasonable cost of remedying the defects if that cost is not clearly disproportionate to the probable loss in value. The appellate court distinguished the Crest case from cases such as Eastlake allowing a repair damage award, because the original slab poured by Crest did not meet contractual specifications and did not meet performance standards. The Court also stated that Crest did not prove that it suggested repair would have been adequate. In fact, there was evidence that Crest's proposed remedy was not an adequate repair for the slab due to decreased durability and because the long-term maintenance of the slab would be substantial. Because of this, BD was entitled to the full removal and replacement of the slab. Plaintiffs will likely attempt to utilize the holding in Crest to justify recovery for complete replacement of building components rather than repairs, although defendants can point out that the Court's holding is narrow, limited to the facts, and that Crest failed to meet performance standards. |
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