Jake Wright, Tyler Haley, Tyler Iguchi, Victoria Nicolov
Econ 495
10/29/2010
Case 2
Foreman v. R & L Builders
Brief on Behalf of Defense
The plaintiff brings to the court a suit against the defendant, R & L Builders,
regarding the construction of a pool and building enclosure that the defendant was
employed to construct for the plaintiff. The total cost of completing construction of the
pool and its enclosure was $100,000. When the contract was created, it was stipulated
that the maximum depth of the pool was to be seven feet six inches. Upon completion of
construction, Mr. Foreman found that the maximum depth of the pool was only six feet
nine inches. Mr. Foreman is therefore suing R & L Construction for the cost of
demolishing the currently standing pool and the cost of construction of a new pool.
During the trial, five pertinent facts were revealed to be true: (1) the pool as
constructed is perfectly safe to dive into; (2) there is no evidence that the shortfall in
depth has decreased the value of the pool; (3) the only practicable method of achieving a
pool of the required depth would be to demolish the existing pool and reconstruct a new
one at a cost of $33,000; (4) no evidence has been presented that Foreman intends to
build a new pool at such a cost; and (5) according to an expert witness, the plaintiff has
suffered a $4,000 loss of amenity due to the shallower depth.
The plaintiff is going to argue that the defendant failed to fulfill the contract and
thus, knowingly, breached it. The plaintiff is going to request full compensation of the
pool at a value of $33,000. On behalf of the defendant, we are going to prove to the court
that the defendant adequately fulfilled the terms of the contract and that the additional
demands made by the plaintiff are both irrational and frivolous. There is an opportunity
for the court to establish precedent ensuring that those who enter contracts with irrational
expectations are not rewarded.
After reviewing the facts, we conclude that no breach of contract has occurred in
this instance. A private swimming pool, that is perfectly safe to dive into, was
constructed with a building to enclose it in the plaintiff’s back yard. There was no
specification of the depth of the point where people would dive into the pool. The
contract did provide that at maximum the depth of the pool should be 7 feet 6 inches and
no deeper. My client abided by this request and did not construct a pool that was deeper
than 7 feet 6 inches.
Should the court find in favor of Mr. Foreman, awarding him the damages to the
amount of $33,000, would be considered an economically inefficient solution to the issue
at hand. Had the two parties able to negotiate a settlement out of court, Coase would
suggest, as explained by expert testimony, that the plaintiff would actually hold a $4,000
value on the nine inch variance in pool depth. With low transaction costs and rational
acting by both parties, the most rational conclusion would be for the defendant to offer
the plaintiff no more than $4,000 in order to solve the conflict. However, we believe that
at this point in time the $4,000 loss of amenity suffered by the plaintiff due to the
shallower depth of the pool is a sunk cost. By forcing the defendant to pay the sum, the
court would merely be reassigning welfare; and as the plaintiff has already received a
usable swimming pool, the transaction should be completed without the need to
recompense the plaintiff for the minor variance in pool depth. The plaintiff would achieve
maximum utility from having had a pool built at his optimum preference of seven feet
and six inches in depth. Having had both a pool and its enclosing building constructed, he
can be considered to be better off than before he had made the payment to the defendant.
We know that if the defendant paid the plaintiff the full cost of $33,000, it would allow
him to reconstruct the pool at his optimum preference. However, a payment of $4,000
from defendant to plaintiff would make the plaintiff equally satisfied as the new pool as
he values the present pool $4,000 differently than the current pool. Therefore, as he is
indifferent between receiving either $33,000 or $4,000 as compensation, and it is more
economically efficient to recompense the defendant with $4,000 for lost amenities.
In the case of Morin Building Co. v. Baystone Construction Co. 717 F. 2d
413(1983), where the subcontracted defendant built an aluminum wall that was judged as
not having been sufficient by the plaintiff's employer, the performance standards of a
contract are established. There are two standards: that of a "reasonable person" when
functionality matters, and "good faith" when aesthetics matter. In the Morin v. Baystone
case, as the wall was built for a factory, aesthetics were not taken into account, and the
court ruled in favor of the defendant. Although the swimming pool is built on a
residential lot where aesthetics are taken into account, we argue that the "reasonable
person" rather than "good faith" standard is applicable in this scenario. Such is the nature
of a swimming pool, that when looking down into it, it is impossible to judge a variance
in depth of a mere nine inches. Since the only complaint the plaintiff has about the pool is
one of functionality (since, as previously stated, depth cannot be an issue of aesthetics),
then the "reasonable person" standard must be the one adhered to; and since the pool is
fully functional at its present depth, the defendant should not be responsible for any
damages.
The outcome of Groves v. Wunder, as the plaintiff will no doubt rely on, is also
not applicable to this case. Instead, the more applicable case is that of Peevyhouse v.
Garland Coal & Mining Co. 382 P. 2d 109 (1963), where the defendant leased the
plaintiff's land for mining purposes and then failed to restore the land. In this case, the
judge cites Jacob & Youngs, Inc. v. Kent, where the decision ruled that "the owner is
entitled to the money which will permit him to complete, unless the cost of completion is
grossly and unfairly out of proportion to the good to be attained. When that is true, the
measure is the difference in value." The Peevyhouse v. Garland judgement, followed by
the basis set out in the Jacob & Youngs, Inc. v. Kent, thus establishes a common law
practice of awarding the difference in value.
One will note that the statement mentioned previously claims, regarding the cost
of completion (which in this case would be $33,000) and in keeping with these two
precedents, the value of the good attained would be a mere $4,000. This figure represents
the amenity lost by the plaintiff due to the pools shallower depth. Since one of the key
facts stated that the plaintiff has made no plans to eradicate and erect a new pool in place
of the present one built by the defendant, the variance in swimming pool maximum depth
between six feet and nine inches and seven feet and six inches is a nonentity, and the
damages should amount to nothing. This situation illustrates the common law practice of
awarding difference in value instead of “cost of performance,” as the defense will
undoubtedly argue.
Just as the courts try to interpret missing items in contracts, it should also be up to
the court to decide whether or not a specific stipulation of a contract, or the enforcement
thereof, can render a contract breached. Though a pool does have some aesthetic value, it
is difficult to argue that the value was diminished by such a miniscule differentiation in
depth. My client built a completely safe pool that was entirely within the stipulations of
the original contract, and any further or more specific points should have been brought up
by the plaintiff to avoid said confusion. This combination of facts and precedents shows
that whichever avenue that the courts decide, my client should not be held responsible for
damages to Mr. Foreman.