Constructive Conditions of Exchange: The Avoidance of Forfeiture

Note: Jacob & Youngs v. Kent is a famous opinion by Judge Cardozo.

Case: Jacob & Youngs v. Kent (1921; NY)

Facts: P built country residence for D and due to some oversight, installed some
other brand of plumbing pipes than the ones promised (Reading). D asked P via the
architect to do the work all over again (since it wasn't what was specified in the
K). Because the pipes had already been encased within the walls except in a few
places where it had to be exposed, to replace the Cohoes Pipe with the contracted
for Reading Pipe would have meant more than the substitution of other pipe. P
would have had to demolish at great expense of substantial parts of the completed
structure. The pipe installed was perfectly good, but just happened to be from the
wrong manufacturer. There would be a lot of economic waste involved in tearing
out the old pipe. P left the work untouched, and asked for a certificate that the
final payment was due (arguing substantial performance). When D refused, P sued
for the balance due in the amount of $3,483.46.

Issue: Should P be forced to replace the pipes when they were not the exact
brand requested in the K, even though basically the same (and of same quality),
when having to replace them would cause of very great expense? - No.

Holding: Judgment for P; P gets his money; he does not have to rip out the Cohoes
pipe and replace it with Reading.

Reasoning: (The contract also called for tearing down the whole thing if anything
was done wrong. But Cardozo ignored this provision!).
Judge Cardozo ruled for the plaintiff, and the defendant was ordered to pay the
$3,500. Judge Cardozo ruled that when it is grossly unfair to require completion
of a contract, "difference in value" should be the measure of damages. In other
words, since there was no difference in market value between homes with Reading
pipe and homes with another pipe, the defendant could not recover cost of
completion. (Since the defendant did not sue for cost of completion, Judge Cardozo
implicitly meant that the cost of completion did not provide an affirmative
defense offsetting the $3,500 owed.)
○ When the defect is insignificant, the court will find that there was
substantial performance and excuses the breach of using the same type and quality
of pipe which parties had agreed were the same except for brand name. Measure of
damages is not the cost to rip out the old pipe and install the new, but the
difference in value which in this case is zero dollars.

RULE: Substantial performance occurs when the contract was not performed
exactly, but was performed to the extent that the difference in the end result is
insubstantial. Where there is substantial performance the harmed party may not
recover the cost of completion, but rather the difference in market value.

Summary: Reading pipe case. Wrong brand pipes used (happened due to mistake, not
intentional), but they were of same quality, etc., just not the brand that owner
wanted and that was in the agreement (so it was a breach of K). To fix this,
builder would have to tear down a lot of work, and start all over again.
[Substantial performance here, so owner still had to pay for the work] Cardozo
determined the measure of damages for using the wrong pipe should be calculated by
the "difference in value." The difference in value was the difference in market
value between homes with Reading pipe and homes with another pipe, which was $0
(it is not measured by the cost of ripping out the old pipes to install the
reading pipes).
Notes

• Restatement § 241
• Factors Judge Cardozo wants to consider in deciding whether there is substantial
performance?
• How do you weight the 2 things (from pg 781, "consistency & certainty…etc," or
"fairness & equity."?
○ Better to have a standard of fairness & equity?
• Factors in substantial performance (Cardozo):
○ Purpose (of having that condition) - maybe reliable plumbing
○ Desire - high quality
○ Excuse -
§ Excuse on part of contractor, but in favor of homeowner (bad excuse)
□ Negligence: Worker didn’t check after 1st shipment of pipe to
see if he was getting Reading pipe or otherwise
§ What would be a Good enough excuse from contractor:
□ I didn’t realize it was a different brand
□ I thought after 1st shipment, they would continue to send the
same so I didn’t check
§ Intentional;
□ I figured it was of the same quality, or wanted to save money
§ You would evaluate the excuses to analyze. The more the breaches are
deliberate, less likely to offer the substantial performance.
○ Cruelty of strict enforcement
• Menial