Occasion: Jacob & Young’s Inc. (plaintiff) built a residence for George E. Kent (defendant) and finished the house in June of 1914. The contract between the company and customer specified that all pipes must be manufactured by Reading Pipe Company. The builder inadvertently installed pipe from other manufacturers, though the pipe was of equal quality.

 

George E. Kent discovered this in March of 1915 and made a complaint of defective performance. Kent refused to pay the remaining $3,483.46 unless the house was rebuilt with Reading pipe. However, replacing this pipe would have required demolishing substantial portions of the finished home at a great expense. Jacob & Young’s Inc, sued Kent for the payment of the remaining balance of 3,483.46.

 

Legal Issue: There are two issues to discuss. Firstly, did the owner only have to pay the final installment if the builder installed Reading pipe, or were the duties to pay and to install Reading pipe separate promises? Secondly, if  the builder breaches, should damages be measured by the cost to fix/complete the work or by the loss in property value?

 

Holding: The New York Court of Appeals decided on January 25, 1921 to rule in favor of Jacob & Youngs Inc.

 

Reasoning: Concerning the first question, the court emphasized the doctrine of substantial performance. Which means that when a contractor has performed in good faith and the defect is minor, the owner cannot demand destruction and reconstruction. The doctrine of substantial performance does not of course apply to less than substantial work but also willful breaches of a contract. Substantial performance is usually determined by considerations of justice and presumed intention. Concerning the second question, the court determined that damages should be measured by the difference in value (diminution), not the cost of tearing down and rebuilding and that requiring replacement would mean demolishing large portions of the finished home, which would be economic waste. In the case here, the diminution of value is nothing, because the pipes used were equal in value to the Reading pipes.

 

Case File:

 

https://law.justia.com/cases/new-york/court-of-appeals/1921/230-n-y-239-1921.html

 

 

Further Information on the Subject:

 

https://youtu.be/rVXIrHExuEk?si=UyuAzGkyMSEqN6Ni