How to Calculate Damages for a Breach of Construction Contract

Recently while catching up with an old friend over a cup of coffee, they sought my advice on a problem their grandmother was having with a construction contractor.

Their grandmother had hired the contractor to redo her kitchen, and halfway through the job, the guy and his team disappeared for days with no communication. What happened is that the contractor had gotten another client who wanted repairs done at their restaurant quickly, and they had been offered more money to start the job immediately.

So, they decided to leave my friend’s grandma’s job to focus on that, then come back to complete her work later.

The first thing I asked them after listening to this crazy story was whether they had signed a construction contract, and their response was yes.

A construction contract is a legally binding document between a contractor and their client that specifies, among other things, the construction work to be done, the payment terms, the quality of materials to be used and time the project will take complete.

I proceeded to explain to them that if the contract had been drafted by an experienced construction attorney, it was highly likely that there had been a builder breach of contract, and their grandma could take legal action against the contractor.

When Does a Breach of Construction Contract Happen?

When you enter into a verbal or written contract, you and all parties involved must honor the terms of the agreement.

If one or all parties in a contract fail to perform what is expected of them for no justifiable reason, a breach of contract has occurred.

In a construction contract, a breach may occur due to several reasons including;

  • The contractor fails to complete the job described in the contract on time or at all
  • The contractor uses more substandard materials than what was promised in the contract
  • The contractor deviates from the project plan agreed upon in the contract
  • The client fails to pay the contractor on time
  • The client fires or replaces the contractor without warning or justifiable cause

What Are the Possible Remedies for a Breach of Construction Contract?

If a party in a construction contract alleges there has been a breach, there are several ways the parties involved can resolve the matter.

  • Negotiate and Settle

You and the contractor could hold a discussion and try to resolve the matter between yourselves.

For example, if the breach occurred because the contractor used substandard materials, you could raise this issue with them, and after having a discussion you could agree that they redo the job with the quality of material agreed upon in the contract.

  • Mediation

If you can’t resolve the breach of contract between yourselves, you could try official channels such as mediation.

This will involve working with a mediator, who is a neutral third party, to find a solution to the breach of contract that is agreeable to all parties involved.

A mediator cannot take sides or impose a solution to your dispute. The individual, preferably a retired judge or experienced attorney, has one role only – to guide discussions between the warring parties so they can resolve the matter amicably and quickly.

  • Litigation

If the above two methods fail, the next course of action is going to court.

This means the person alleging a breach of contract can proceed to file a lawsuit against the person who breached the contract.

In court, the person who files the lawsuit has to prove that a breach of contract did occur.

If they’re successful, the court may award them damages, which is monetary compensation for financial losses incurred due to the contract breach.

How Are Damages in Breach of Construction Contract Awarded?

Damages you could be awarded in a breach of construction contract case include:

  • Compensatory Damages

This is the most common type of damages given in a breach of contract case.

Here the person who successfully filed the breach of contract lawsuit is awarded financial compensation for losses incurred due to the breach.

There are two types of compensatory damages:

  • Expectation damages. When you hire a construction contractor, you’ll agree on the amount you’ll pay them to perform the job. The amount will be included in the contract, and this is what they’ll expect to earn after completing the task.

If you breach the contract and they sue you, they can be awarded the amount you agreed on for the job as expectation damages.

  • Consequential damages. When a breach of the construction contract occurs, the injured party may incur some unexpected losses.

For example, if a building contractor was remodeling a hotel, the hotel may have to stay closed longer if they breach the agreement signed, which can lead to a loss of revenue. The profits lost can be awarded as consequential damages.

To give you an example of compensatory damages, if you hired a building contractor to renovate your home for $4,000 but they didn’t complete the job, and you had to hire another contractor who asked for $7,000, the first contractor can be asked to pay you $3000, which is the extra cost you had to pay to get the job done.

Also, if you’re the breaching party, in which case you hired the contract for $4,000 but changed your mind after signing the contract and didn’t use their services or pay them, they can sue you for breach of contract, and you could be asked to pay the $4,000 fee you agreed on.

  • Liquidated Damages

Provision for these damages is usually included in the agreement signed between a client and construction contractor.

The provision states the amount of money that will be paid if a certain breach of contract occurs.

For example, during the construction contract negotiations, you could agree that if a contractor doesn’t complete the work assigned within the specified time, they must pay you $500 for each extra day they take to complete the work.

So, if they complete the project after 15 days instead of the 10 that you had agreed on, they’ll be liable to pay you $2500 ($500 x 5).

The penalty for delayed completion of work needs to be reasonable because a judge is unlikely to award liquidated damages that are excessive.

  • Nominal Damages

If you suffer no or little losses due to a breach of contract, a court may award you nominal damages, often a small amount of money, just to hold the breaching party accountable.

Other damages you may be entitled to should you experience a breach of construction contract, include punitive damages, restitution, and general damages.

The best way to know what damages you’re entitled to is by speaking to an experienced contract attorney.

Gallagher Krich, APC: Your Contract Attorneys

Should you find yourself in a situation where a breach of contract has happened, contact Gallagher Krich, APC. Our attorneys have successfully handled hundreds of breach of construction contract cases and our expertise can help you amicably resolve your contract dispute or get you the damages you deserve from the breaching party.

Contact us online now or give us a call at (858) 926-5797 for a free consultation on your legal options under California state laws for a breach of construction contract.

Latest News & Updates

Meet Our San Diego Attorneys

Thomas F. Gallagher, Esq.


(858) 926-5797
tom [at]

Troy B. Krich, Esq.


(858) 926-5797
troy [at]

Contact Gallagher Krich, APC

What Clients Say:

Mike K., Google

August 11, 2023

Thank you so much for all your help in resolving a real estate matter so quickly and efficiently.

Mike K

What Clients Say:

Veronica D., Yelp

October 17, 2023

We had the pleasure of speaking with Troy for a contractor issue we had recently. He is smart, patient, empathetic and basically the lawyer we would want to be our side for (may God forbids) any legal assistance or battle we need! The interaction we had with him was “free of charge” but we already felt his dedication and concern (he took the time to reach out and follow up on how he can assist us further) which busy lawyers would normally ask their admin or assistant to do so on their behalf. We will be sure to contact again Troy, if need be! Thank you!!

Veronica D

What Clients Say:

Daniel E., Google

October 11, 2022

I left a voicemail for Tom late Sunday evening and received a phone call first thing the next morning.

Tom was very quick to reply to any questions I had, and if he was caught up in a meeting, he was sure to return my call promptly.

Tom provided sound and logical advice, during a very stressful and uncertain time. At times I asked him to be more aggressive and was often met with the pros and cons of that decision, allowing me to understand the approach and thought process behind his strategy.

Ultimately he provided options for several paths for us to take, worked swiftly, and got us where we needed to be.

He reached out several times to check on my sanity and make sure I was good.

As someone with very high expectations, I would highly recommend his services. He provided expertise that proved to be successful, and also took the time to make sure I was emotionally solid.

Tom assisted with me with a 50% / 50% ownership conflict.

Daniel E

What Clients Say:


February 23, 2022

Really informative and actionable, very grateful to have connected and I look forward to working more with them in the future.


What Clients Say:


February 8, 2022

i liked that a lawyer, and not a staff member, called me to get the details and he gave me his opinion of what his initial thoughts are about my case.


What Clients Say:

Bob W., Google

August 30, 2021

What was thought to be a simple breach of contract turned into a nightmare. Through their tenacity and their deep knowledge of the law, we were successful. There is no reason to look any further as you will not get any better representation than this firm. I highly recommend them and strongly suggest that if you are considering starting a business or are already managing one, this firm will guide you, avoiding the troubled waters businesses sometimes find themselves in.

Bob W

What Clients Say:

Rasmita M., Google

August 13, 2021

Johnny Nitti helped us with our estate plan. He was very meticulous while drafting the plan and spent enough time to explain the details to us. He filed the deed with county recorder and paid for the fees himself. Overall, Johnny did a great job and we definitely plan to work with him in the future for any updates to our EP.

Rasmita M

What Clients Say:

George A., Google

August 6, 2021

Johnny Nitti helped me with my estate planning (will, living trust, etc.) and made the process smooth. He is very responsive and organized. I highly recommend contacting Johnny.

George A

What Clients Say:

Ashley C., Google

July 18, 2020

Tom Gallagher is very knowledgeable and helpful when it comes to business law. I reached out to him reguarding the Pandemic and my salon and I’m so glad I did. Many times stress and hard times can fog clarity and he really helped me understand the laws.

Thanks Tom!!!

Ashley C

What Clients Say:

Evan D., Google

July 16, 2019

Thank you Troy for everything! Professional, prompt, and smooth handling of my case. I will be recommending to anyone that is in need of a lawyer.

Evan D