Jacob and Youngs v. Kent PDF

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Jacob & Youngs (gen contractor) v. Kent COURT AND DATE: Court of Appeals of New York (1921) PROCEDURAL HISTORY: Trial Court: Jacob not allowed to introduce evidence that pipe was of same quality. Kent wins. ISSUE: If a party substantially performs its obligations under a contract, will that party be forced to bear the replacement cost needed to fully comply with the agreement? TRIGGER FACTS: Jacob & Youngs (Jacob) (plaintiff) is a general contractor that built a country residence for Kent (defendant). The contract stated that Jacob was to be paid $77,000, and one specification in the contract was that all pipes used be manufactured in Reading, Pennsylvania. Jacob completed work in June 1914. In March 1915, Kent noticed that some of the pipe was manufactured in other places besides Reading. Kent demanded the pipe be replaced. Replacement of the pipe, however, would require substantial additional work and expense by Jacob. Additionally, the existing pipe was of the same quality as Reading pipe and was supplied based on an innocent mistake by Jacob caused by the inattention of its subcontractor. Jacob left the existing pipe untouched and asked for a certificate from Kent that the final payment of $3,483.46 was due. Kent refused to supply the certificate, and Jacob brought suit to recover damages. At trial, Jacob was not allowed to introduce evidence that the pipe installed was of the same quality as Reading pipe, and the jury entered a verdict for Kent. The appellate court reversed and granted a new trial. PLAINTIFF’S MAIN ARGUMENTS: DEFENDANT’S MAIN ARGUMENTS: RULE (the law): If a party substantially performs its obligations under a contract, that party will not be forced to bear the replacement cost needed to fully comply with the agreement but instead will owe the non-breaching party the difference in value between full performance and the performance received. HOLDING + REASONING: No. Jacob substantially performed its contract with Kent with only trivial defects and is thus entitled to receive the remainder of the amount owed under the contract. A party that substantially performs its obligations under a contract may recover expectation damages for any remaining payment owed under the contract, minus an offset for defects in the party’s performance. “Substantial performance” is a question of degree and is appropriate for determination by a trier of fact. The trier of fact appropriately concluded that the defect in the pipes supplied by Jacob is insignificant in relation to the overall project. Thus, even though full performance of the contract was not completed, principles of fairness and equity justify not penalizing Jacob significantly by withholding payment when the effect of the defect itself was so insignificant. The need for fairness and equity in the enforcement of contracts outweighs the need for consistency and certainty in legal principles as a policy matter and

justifies awarding expectation damages for Jacob on the contract which it substantially performed. The decision of the appellate court is affirmed....