California Civil Jury Instructions (CACI)

354. Owner’s/Lessee’s Damages for Breach of Contract to Construct Improvements on Real Property

To recover damages for breach of a contract to construct improvements on real property, [name of plaintiff] must prove:

[[The reasonable cost to [name of plaintiff] of completing the work;]

[And the value of loss of use of the property;]

[And the reasonable cost of alternative housing from the date the work was to have been completed until the date the work was completed;]

[Less any amounts unpaid under the contract with [name of defendant];]]


[The difference between the fair market value of the [lessee’s interest in the] property and its fair market value had the improvements been constructed.]

New September 2003

Directions for Use

Read this instruction in conjunction with CACI No. 350, Introduction to Contract Damages. The bracketed options state alternative measures of damage. Choose the option appropriate to the facts of the case. For a definition of “fair market value,” see CACI No. 3501, “Fair Market Value” Explained.

Sources and Authority

  • “The proper measure of damages for breach of a contract to construct improvements on real property where the work is to be done on plaintiff’s property is ordinarily the reasonable cost to the plaintiff of completing the work and not the difference between the value of the property and its value had the improvements been constructed. A different rule applies, however, where improvements are to be made on property not owned by the injured party. ‘In that event the injured party is unable to complete the work himself and, subject to the restrictions of sections 3300 and 3359 of the Civil Code, the proper measure of damages is the difference in value of the property with and without the promised performance, since that is the contractual benefit of which the injured party is deprived.’ ” (Glendale Fed. Sav. & Loan Assn. v. Marina View Heights Dev. Co., (1977) 66 Cal.App.3d 101, 123–124 [135 Cal.Rptr. 802], internal citations omitted.)
  • “If the work were to be done on plaintiffs’ property the proper measure of damages would ordinarily be the reasonable cost to plaintiffs of completing the work. A different rule applies, however, when the improvements are to be made on property that is not owned by the injured party.” (Coughlin v. Blair (1953) 41 Cal.2d 587, 600 [262 P.2d 305], internal citations omitted.)
  • “It is settled . . . that the measure of damages for the breach of a building construction contract is ordinarily such sum as is required to make the building conform to the contract. In such situations, the diminution of value rule cannot be invoked and the measure of damages is not the difference between the actual value of the property and its value had it been constructed in accordance with the plans and specifications.” (Kitchel v. Acree (1963) 216 Cal.App.2d 119, 123 [30 Cal.Rptr. 714], internal citations omitted.)
  • “The available damages for defective construction are limited to the cost of repairing the home, including lost use or relocation expenses, or the diminution in value.” (Erlich v. Menezes (1999) 21 Cal.4th 543, 561 [87 Cal.Rptr.2d 886, 981 P.2d 978], internal citations omitted.)
  • “Where the measure of damages turns on the value of property, whether liability sounds in tort or breach of contract, the normal standard is market value. The definition of market value and the principles governing its ascertainment are the same as those applicable to the valuation of property in eminent domain proceedings and in ad valorem taxation of property. In Sacramento etc. R. R. Co. v. Heilbron, market value was defined as ‘the highest price estimated in terms of money which the land would bring if exposed for sale in the open market, with reasonable time allowed in which to find a purchaser, buying with knowledge of all of the uses and purposes to which it was adapted and for which it was capable.’ That classic exposition with subsequent refinements has always been the accepted definition of market value in California.” (Glendale Federal Savings & Loan Assn., supra, 66 Cal.App.3d at pp. 141–142, internal citations and footnote omitted.)

Secondary Sources

1 Witkin, Summary of California Law (10th ed. 2005) Contracts, §§ 909–910

10 California Forms of Pleading and Practice, Ch. 104, Building Contracts, § 104.10 et seq. (Matthew Bender)

6 California Points and Authorities, Ch. 65, Damages: Contract, § 65.100 (Matthew Bender)

15 California Legal Forms, Ch. 30D, Construction Contracts And Subcontracts, § 30D.223 (Matthew Bender)

1 Matthew Bender Practice Guide: California Contract Litigation, Ch. 10, Seeking or Opposing Statutory Remedies in Contract Actions, 10.05