Dawson, pp. 20-23: Comment: Cost or Value in General Contract Law


The Restatements of the Law, published by the American Law Institute, are used by courts as persuasive authority.


§ 346 of the first Restatement of Contracts says that the correct measure of damages in the case of defective or unfinished construction is:


·        The cost of completion if there is not economic waste involved, or

·        The difference between the value of the product on performance minus the value the plaintiff has already received if the first measure of damages would involve excessive economic waste.


This has been changed somewhat in the Restatement (Second) of Contracts.  Instead of talking about “economic waste”, the new version calculates damages by:


·        Diminution in the market price of the property, or

·        The cost of completing performance or fixing the problem.


Contracts v. Torts


The law of contracts does not punish contract breakers.  It only seeks to disgorge unjust enrichment and to put the injured person in the position that performance would have done.


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