A building contractor entered into a contract with the local college to remodel a residence hall during the summer. As specified by the contract, the work had to be completed before the fall semester began at the beginning of September. Because the contractor received a great deal of other maintenance business from the college, his price of $400,000 was significantly lower than other contractors and he was not going to demand payment until the work was completed. By the end of the first week in August, the contractor had completed 75% of the project and had expended $350,000 in labor and materials. At that time, however, a labor dispute between the contractor and his employees prompted most of the workers to walk off the job. Because prospects for a quick settlement of the dispute were doubtful, the contractor informed the college that he would not be able to meet the completion deadline. A week later, the college obtained another contractor who was able to finish the project by the end of August. The college paid him $150,000, which included a substantial amount of overtime for his workers. The increase in value of the residence hall due to the remodeling was $425,000. The original contractor, who had not been paid, files suit against the college, which files a counterclaim against him. What should the contractor recover from the college?

When a construction company breaches a contract during construction, the nonbreaching party can sue to recover any damages caused by the delay of the work and the cost of completing the work. In this case, since the construction company had not been paid any money in advance, the court will probably allow them to recover incurred costs.

In this case, the construction company should be able to recover the unpaid contract minus the cost to complete the work = $400,000 - $150,000 = $250,000.