Contract Law in the Construction Industry Context

Front matter

Spon Research

CONTRACT LAW IN THE

CONSTRUCTION INDUSTRY CONTEXT

PART 1 Contract law and the construction industry

1 The practice and study of construction law Construction law as a practice specialty 4 A scholarly perspective on construction law 6 Looking for meaning in the construction industry contract cases 8

PART 2 The role and significance of the industry cases

2 The construction industry and core principles of contract law Substantial performance 13 Economic waste 25 Unilateral mistake 29 Offer as enforceable option contract 34 Changed circumstances and the pre-existing duty rule 38 Assessing the industry’s impact on core principles 42

3 Adaptations, refinements, and constraints in the industry cases Implied warranties and other implied obligations 44 Third-party dispute resolution 49 Damages 52 Measure and proof of damages 53 Betterment 54 xl viii Contents

Express contractual limits 56 Liquidated damages 56 No-damage-for-delay clauses 57 Conditional payment clauses 57 Termination for convenience 58 Unilateral changes 59 Third-party beneficiaries 60 Contextual interpretation 61 The duty to disclose 62 Impossibility, impracticality, and force majeure 63 Other contract interpretation principles 65 Subcontracts 65 And much more 67

PART 3 The federal cases

4 The U.S. Supreme Court cases Owner’s implied obligations 72 Dispute resolution 73 Construction liens 77 The Court’s construction contract jurisprudence 79 Constitutional issues 85 Taking stock of the Court’s industry cases 87

5 Federal construction contract law today

The special place of the federal construction contract cases 89

Implied obligations 91

Changes to the contractor’s obligations 95 The changes clause in the federal decisions 96 Differing site conditions 101

Termination 104

Contractor’s measure and proof of damages 106

The Severin doctrine 108

Lessons from the federal cases 112

PART 4 Assessing contract law in the construction industry context

6 Contract theory and the construction industry cases Competing conceptions of contract 115

Contents ix

The dubious reign of classical contract 123 Contract theory and the U.S. Supreme Court cases 124 The industry rejects two classical rules 128

Evolving trends, the U.C.C., the second Restatement, and the influence of industry cases 130

Distinctive trends in the industry cases 135

The special story of contract interpretation 138 Text and context 139 The interpretive process 142 Contract interpretation principles in industry cases 145 Text and context revisited 152

An aside: The economic loss rule of tort law 154

Detecting contract theory in the industry context 157

7 A backward glance and a forward glimpse 159 The industry cases in retrospect 159 The future of contract law in the industry and beyond 161 The future of construction law scholarship 163

Preface

Experience brings contract law to life. Two centuries’ experience with construction contract disputes has helped to shape contract law. That experience has also given birth to an important branch of contract law in practice and in the courts. Contract scholars have overlooked or under-valued the role and place of the construction industry cases. Indeed, the academy in the United States largely ignores construction law as a subject of scholarly investigation and analysis. This book begins to remedy that scholarly neglect.

This book chronicles how the contract cases from the construction industry have influenced, solidified, refined and sometimes particularized U.S. contract law. The book's central claim is that the construction industry experience has helped to contextualize U.S. contract law and, therefore, has encouraged the common law to become more receptive to flexible legal standards and practices and less constrained by the relatively rigid rules that often characterize contract law. Other scholarly books analyze the themes, values, standards, and principles of contemporary contract law, and some briefly note the special relational and contextual characteristics of construction industry contracts, but none captures how construction industry relationships and practices have influenced the common law of contracts.

Acknowledgments

Generous research support from the University of Arkansas School of Law and encouragement from my faculty colleagues and especially from members of the School of Law’s administration made this endeavor possible. Ann Carol Farmer, J.D., and Sarah Kueter, J.D. Candidate 2020, provided careful research assistance and other help, and my Administrative Assistant, Robin Coker, provided invaluable service in assembling the final manuscript. Dr. Melody Herr, Head of the Office of Scholarly Communications at the University of Arkansas, offered thoughtful comments on early draft portions of the book and insightful suggestions about the publication process. Finally, Joseph Circo and Carmella Circo, having sacrificed their own aspirations to the Great Depression and a World War, endowed me with intellectual curiosity for a lifetime.

Additional funding for this project has been provided through the generous support of the Ben J. Altheimer Professorship of Legal Advocacy at the University of Arkansas School of Law.

Part 1 Contract law and the construction industry

1 The practice and study of construction law

Construction Law evokes contrasting connotations. Practitioners know construction law as a legal specialty for those representing project owners and investors, design professionals, and the construction industry trades. In that sense, construction law stands as an established and recognized field, encompassing the broad legal knowledge and skills required to advise industry clients. The bar embraces construction law as a practical amalgamation drawn from a legal spectrum that includes tort, contract, insurance and risk management, intellectual property, labor law, administrative law, surety law, complex litigation and alternative dispute resolution, secured financing, statutory liens, design professional rights and obligations, and related topics. Legal theory, policy, and organizing principles hold, at best, a secondary place in applied construction law. For academics in the United States, however, construction law’s very legitimacy as the subject of scholarly inquiry remains tentative. Many law professors, if they have any developed conception of construction law at all, think of it only as a practice specialty involving a disparate array of legal principles, statutes, and regulations affecting design and construction activities. Only a few U.S. legal academics research and write in the area. A small minority of law schools regularly offer a course in construction law, and most of them hire practicing lawyers to teach the subject on a part-time basis.

Is there, in fact, a coherent body of construction law meriting scholarly inquiry? What might justify conferring such status on legal aspects of the construction industry? Beginning in the second half of the twentieth century, Justin Sweet, now Professor of Law Emeritus at the University of California, Berkley, pioneered the scholarly study of U.S. construction law. Throughout his distinguished career, Professor Sweet has called on legal educators to pay greater attention to the field.' Others concur. In an influential 1998 law review article, Professor Thomas Stipanowich, now the Academic Director of Pepperdine Law’s Straus Institute for Dispute Resolution, convincingly argued the case for more scholarly attention to construction law.* Two years later, Professor Jay Feinman, Distinguished Professor at Rutgers School of

1 See, e.g., JUSTIN SWEET, SWEET ON CONSTRUCTION Law 37 (1997). 2 Thomas J. Stipanowich, Reconstructing Construction Law, Wis. L. Rev. 463, 493-98 (1998).

Law, Camden, disappointedly concluded that, except for the work at that time of Professors Sweet and Stipanowich, “there has been no sustained scholarly attention” involving construction contracting in particular.?

Bruner and O’Connor’s excellent treatise on construction law, published by Thomson Reuters, does much to rectify the situation, especially because it offers many valuable scholarly insights along with its comprehensive practical guidance. Steven G. M. Stein’s treatise on construction law, published by Matthew Bender, also thoroughly covers the topic, especially for practitioners. The Stein treatise dates back to 1983, while Bruner and O’Connor introduced theirs as recently as 2002. Thankfully, we have these two multivolume works to help fuel the academic venture, but they cannot furnish the complete solution. Indeed, the Bruner and O’Connor treatise dedicates an entire section to the legal academy’s relationship with construction law, which it characterizes as “Academia's benign neglect of the study of construction law.”* An economic case study of a complex construction project similarly notes that “Legal and economic scholars have devoted little attention to an industry—construction—that seems to offer valuable lessons about the organization of economic activity.” As recently as 2011, Professor Sweet would again lament the “serious paucity of research on construction law."

This book responds to the call for more scholarly attention to construction law. It concentrates on the close relationship between the construction industry experience and the common law of contracts. As a first step, however, this introductory chapter offers an overview of construction law, first from a practitioner’s perspective, and then from a scholar’s. Finally, it reframes the case for expanding legal research into construction law.

Construction law as a practice specialty

In 1981, one of the most dramatic aspects of construction law thrust me into the specialty. I was then a junior member of a team addressing liability issues stemming from the notorious collapse of suspended lobby “skywalks” at the Kansas City Hyatt Hotel. That disaster claimed 114 lives. The incident brought about renewed attention to life and safety issues that building design and construction inherently involve.’ My immersion in extensive legal

3 Jay M. Feinman, Relational Contract Theory in Context, 94 Nw. U.L. Rev. 737, 747 (2000).

4 1 Pup L. BRUNER & PATRICK J. O'CONNOR, JR., BRUNER AND O'CONNOR ON CONSTRUCTION Law § 1:4 (Westlaw 2018).

5 William A. Klein & Mitu Gulati, Economic Organization in the Construction Industry: A Case Study of Collaborative Production Under High Uncertainty, 1 BERKELEY Bus. L. J. 137, 138 (2004).

6 Justin Sweet, Standard Construction Contracts: Academic Orphan, CONSTRUCTION. Law., Winter 2011, at 38, 39.

7 See Duncan v. Mo. Bd. for Architects, Prof] Eng’rs & Land Surveyors, 744 S.W.2d 524 (Mo. Ct. App. 1988); see also Carl J. Circo, When Specialty Designs Cause Building Disasters: Responsibility for Shared Architectural and Engineering Services, 84 Nes. L. Rev. 162, 203-07 (2005).

research and tedious discovery processes stemming from that horrific tragedy led to my lifelong professional ties to the construction industry. Over the next two decades, I learned the enormity of the construction industry in both human and economic terms. I came to appreciate its legal, financial, and technical complexity through representing public and private project owners, construction lenders, design professionals, general and trade contractors, and other participants in a wide range of projects. The work convinced me that the legal aspects of building design and construction require expertise both practically and intellectually.

Drawing on similar experience, courts and commentators have noted that construction industry disputes often merit a distinctive application of legal principles. For example, in one case, a trial judge declared that “construction contracts are a separate breed of animal.” Another highlighted the extraordinary risk management challenges the industry presents, saying, “except in the middle of a battlefield, nowhere must men coordinate the movement of other men and all materials in the midst of such chaos and with such limited certainty of present facts and future occurrences as in a huge construction project.”” The Colorado Supreme Court explained that, in resolving liability issues arising from construction projects, judges must often deal with complex “networks of interrelated contracts.”'? Bruner and O'Connor offer this characterization of the legal system’s adaptation to the construction industry context: “Like other highly complex fields of human endeavor, the construction process has spawned its own unique customs, practices, and technical vocabulary, which in turn led courts and legislatures to develop legal principles consistent with industry realities.” Professors Goetz and Scott, in addressing aspects of interpretation problems in contract law in general, concluded that “unusual economic conditions” affecting certain construction project delivery systems resulted in “new contractual regimes.”'' Observations such as these attest to construction law’s unique characteristics for courts, arbitrators, and legal counsel.

A specialized construction bar existed at least for several years before my personal introduction to it. The Bruner and O’Connor treatise provides an excellent, concise account of the professional foresight of the lawyers who first helped to define the practice specialty, beginning around the middle of the twentieth century.” In 1976, the American Bar Association established its Forum on Construction Law (then called the Forum on the Construction Industry), a step that marked a coming of age for the construction bar. The

8 Paul Hardeman, Inc. v. Ark. Power & Light Co., 380 F. Supp. 298, 317 (E.D. Ark. 1974). 9 Blake Constr. Co. v. C. J. Coakley Co., 431 A.2d 569, 575 (D.C. 1981). 10 BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66, 72 (Colo. 2004). 11 Charles J. Goetz & Robert E. Scott, The Limits of Expanded Choice: An Analysis of the Interactions Between Express and Implied Contract Terms, 73 Cat. L. Rev. 261, 296 (1985). 12 Bruner & O'CONNOR, supra note 4, at $ 1:5.

Forum now has several thousand members, and Bruner and O’Connor estimate that the U.S. bar includes more than 35,000 lawyers who concentrate their practices on the construction industry. Today, those practitioners have extensive resources to inform their specialty. Both the Forum and the more recently organized American College of Construction Lawyers publish high quality legal journals, and they, along with a few other local and national organizations, regularly sponsor continuing legal education programs for construction lawyers. Additionally, several publishers offer practice manuals covering every aspect of the construction law practice. Without the professional demand of these practitioners, however, there would be but a scant body of published resources on construction law.

A scholarly perspective on construction law

As noted above, a few academics and commentators have promoted legal scholarship into building design and construction. This book owes much to their work. Construction law, however, has not yet achieved the status of a recognized field of study within the legal academy. This neglect does not reflect a judgment that construction industry cases have no use in legal education. Several observers have noted that industry cases traditionally accounted for up to 20 percent of the primary opinions included in leading contract casebooks.'* My own casual review of current texts suggests a similar count. Nor does the academy’s disinterest result from any lack of specialization among legal educators and scholars, or from any apparent concern among law professors that the balkanization of legal fields could weaken legal education or legal studies. The Association of American Law Schools has over 80 sections covering most legal specialties, from administrative law to trusts and estates. In between, the AALS includes sections on many important industries and economic sectors, such as agriculture and food law, financial institutions and consumer financial services, insurance, internet and computer law, medicine and health care, and sports law. Sections also draw from many highly specialized areas of interdisciplinary studies, including law and anthropology, law and mental disability, law and religion, and law and South Asian studies, to name a few. In addition, the AALS list extends to an impressive number of human endeavors and interest groups, each representing a narrowly targeted but significant societal interest. These cover aging and the law, art law, animal law, disability law, election law, mass communication law, poverty law, and much more. Although I have been teaching, researching, and writing about construction law as a full-time law professor for over 15 years, I am not aware of any substantial group of similarly engaged law professors who might affiliate into an AALS section on construction law. The Forum on Construction Law and the American College of Construction Lawyers

13 See id. at § 1:4 n.9; Stipanowich, supra note 2, at 494; Sweet, supra note 1, at 37.

include committees or groups for construction law professors, but their membership comes almost entirely from part-time professors. Indeed, all the other law school professors whom I currently know to be teaching construction law courses regularly do so on a part-time basis, and they identify primarily as practitioners. Their published works, while exceedingly useful to scholars, speak most directly to the construction law bar.

How can the legal academy give but meager attention to such an important segment of the economy and society? The construction industry generates many complex and varied problems for litigation and for alternative dispute resolution; it presents difficult risk management challenges brimming with legal issues; and it holds the keen interest of a sizeable and distinguished, specialized bar. Why, then, do we find no corresponding academic specialty? On this, I can only speculate. To be sure, the legal aspects of construction do not frequently dominate the headlines in news outlets, save when disaster strikes. The construction industry, as one of the oldest human enterprises, lacks the appeal of the new and novel. The industry rarely generates national or global policy debates. Neither the public nor the legal professorship likely perceives construction law as glamourous. The stakes in construction disputes, while often high-dollar, do not implicate such overarching values as life, liberty, individual autonomy, human happiness, or global peace. Can we not, however, say much the same about many other areas of dedicated legal scholarship? Each of the factors mentioned above probably plays some role in limiting interest in construction as a subject of inquiry in the legal academy, but I doubt that, even in combination, they provide the complete explanation. I suspect that two other circumstances more specifically block the road that could take construction law as known in the practice and in the courts to a place in the legal academy.

First, in an environment that increasingly and quite productively brings interdisciplinary scholarship to our law schools, the construction industry affords no convenient cross-disciplinary bridge within the academic community for law professors. The industry exists instead at an intersection of professional schools. The substantial and important interdisciplinary movement in higher education incentivizes collaborations between law and practically all fields of the humanities and the social sciences, as well as some areas of the natural sciences. It offers much less encouragement to bring together legal educators and their colleagues in architecture, engineering, construction science, and construction management. Moreover, for almost as long as construction law has been a recognized practice specialty, a high proportion of those entering law teaching as full-time professors and who engage in interdisciplinary work hold a J.D. plus an advanced degree in a traditional academic field. They rarely come to the law with post-graduate credentials from the professional schools that serve the construction industry. The second reason relates closely to the first. While architecture, engineering, and construction generate many interesting and important legal issues, academic lawyers who have little or no experience representing industry clients face an especially steep learning curve. An intimate and extended encounter with construction projects affords the best, if not the exclusive, introductory credential for exploring construction law. In combination, these two considerations have probably made it exceptionally difficult for law professors with an interest in the legal issues the industry presents to achieve the critical mass required to give birth to an academic field of construction law. This conclusion intimates no indictment of law professors or their colleagues in other professional schools; it merely offers a feasible explanation of the dilemma that construction law scholarship faces.

Suggesting why the legal academy offers no comprehensive specialty in construction law hardly justifies that state of affairs. The construction industry experience can teach us much about the law. It also has led to some important legal developments and has influenced many others. For these reasons, legal scholars should investigate and illuminate construction law. Through this book, I propose to advance those goals primarily by looking at the common law of contracts in the construction industry context.

Looking for meaning in the construction industry contract cases

My proposal for a more comprehensive scholarly investigation of construction law implies no grandiose idea. Studying construction law will not lead to new first principles of law. It will never define theoretical concepts in the order of private property, freedom of contract, individual rights to autonomy or liberty, or any of the other overarching themes at the heart of legal philosophy, jurisprudence, and legal education. That is only to say that construction law in our law libraries and law schools will not compete with property, contract, or tort, nor will it hold a place in the legal academy next to constitutional law or international human rights. Those who advance the study of construction law will not thereby offer an analytic perspective to equal the comprehensive frameworks of the great interdisciplinary schools, such as law and economics, or law and social science. Studying construction law, however, can further our appreciation of how law evolves and adapts based on experiences in a particularly significant segment of society. It can help us illuminate the strengths and weaknesses of alternative approaches to solving evolving legal problems and regulating exchange transactions. Construction law scholars can also produce research and provide innovative frameworks to help legislatures, administrative agencies, courts, arbitrators, mediators, and practicing lawyers better serve a society increasingly dependent on complex networks of interdependent relationships of the kind known so well to the construction industry.

This book investigates some of these possibilities. It mainly explores the common law of contract as developed in the construction industry context. The two chapters in Part 2 explore the relationship between construction industry cases and several fundamental doctrines and principles of contract law. Chapter 2 covers those doctrines and principles that industry cases influenced most directly, and Chapter 3 addresses the role industry cases have played in adapting, refining, or constraining other doctrines and principles. The two chapters in Part 3 review the federal cases. Chapter 4 looks broadly at cases decided by the U.S. Supreme Court. Chapter 5 reviews the extensive body of construction contract law in the lower federal courts. As Chapter 4 explains, through the cases the U.S. Supreme Court decided during the nineteenth century, and early in the twentieth century, it participated in some fundamental developments in U.S. contract law. After that period, construction industry cases virtually disappeared from the Supreme Court’s docket, except for isolated circumstances in which issues under the U.S. Constitution or federal legislation arose incidentally within the industry. More recently, as Chapter 5 documents, decisions by lower federal courts having jurisdiction over federal contracts have generated a distinct body of construction contract law that has frequently influenced corresponding developments under state law. In Part 4, Chapter 6 analyzes the implications that the construction cases hold for contract theory, and Chapter 7 offers a final perspective on what the construction contract cases teach, how the construction industry experience may influence future legal developments, and where construction law scholarship may eventually head.

Part 2 The role and significance of the industry cases

2 The construction industry and core principles of contract law

Construction industry cases have played several starring roles in the development of U.S. contract law. In 1977, Professor Justin Sweet, who begat construction law scholarship in the United States, wrote that “construction law has led to the development of a few general contract rules of law.” In particular, he named substantial performance, unilateral mistakes in competitive bids, third-party dispute resolution, and unforeseen subsurface conditions. We can modify and expand Professor Sweet's claim by saying that construction law has both influenced and advanced several important principles of contract law. By this I intend two related but distinct claims. First, construction industry cases have played an especially important role in the evolution of a few general principles of contract law. The doctrine of substantial performance, as Professor Sweet noted, offers the most well-recognized example, but there are others. Second, other construction industry cases have refined or customized contract law principles in significant ways. This Chapter considers the first category, beginning with the substantial performance doctrine. Chapter 3 assesses the second.

Substantial performance

We take up substantial performance first, and in considerable detail, not only because it has become closely associated with construction industry contract disputes, but also because its story demonstrates so well the role that this one sector of commerce has played in the common law of contracts. There are, in my opinion, four other contract law topics with sufficiently similar lineage to merit treatment in this Chapter: economic waste; unilateral mistake; offers made irrevocable by reliance; and the decline of the pre-existing duty rule. None of these, however, equals the substantial performance doctrine’s strong link between the industry cases and the associated general principle of contract law. For this reason, I review substantial performance at length and then use that analysis as a benchmark for a briefer assessment of the others.

1 JUSTIN SWEET, SWEET ON CONSTRUCTION Law 294 (1997).

To understand how the substantial performance doctrine evolved and affected contract law, we must begin with the predecessor doctrine of constructive conditions of exchange. Lord Mansfield famously articulated the constructive conditions principle in Kingston v. Preston.? The case involved a contract between a silk mercer and his covenant servant for the sale to the servant of the business and stock in trade. The buyer agreed to make regular payments to the seller for an agreed time and to provide security acceptable to the seller for the payments promised. Lord Mansfield held that the seller was not liable for breach for refusing to consummate the sale when the buyer failed to deliver the promised security. If the contractual promises of the parties were independent, as the buyer argued, then the seller would have had a damage remedy for the buyer's breach but would not have been relieved of the obligation to transfer the business. The express terms of the contract apparently did not specify delivery of the security as a condition precedent to the seller’s obligation. Lord Mansfield held that the arrangement implicitly conditioned the seller’s obligation to transfer the business on tender of the security—the buyer's obligation to provide security was a constructive condition.

Prior to Kingston v. Preston, the common law seems to have rather rigidly presumed that each contracting party’s promise in an exchange of promises was independently binding without regard to the other party's performance.” Kingston v. Preston provided the foundation for the constructive conditions of exchange doctrine, which rebuffs that presumption. Subsequent cases clarified that even when courts properly regard performance of a promise to be a constructive condition, partial performance of the promise might suffice for purposes of the doctrine on the basis that, in certain circumstances, the victim of a partial breach can be made whole through a damage award. In that way, contract law holds the breaching party responsible for the partial failure of performance without effecting a forfeiture of further rights on the contract. This limitation on the constructive conditions doctrine, which eventually became the substantial performance doctrine, avoids unnecessarily harsh consequences when a contracting party has performed to some extent although not completely or perfectly. It emerged both in England and in the United States relatively quickly in Kingston v. Preston’s wake, but its precise dimensions remain cloudy even today.*

3 See 8 CORBIN ON CONTRACTS $ 32.2 (Lexis 2018).

4 See Crouch v. Gutman, 31 N.E. 271, 273 (N.Y. 1892); Ellen v. Topp (1851) 155 Eng. Rep. 609; Boone v. Eyre (1777) 126 Eng. Rep. 160(a) (K.B.) (also decided by Lord Mansfield). See generally 8 CORBIN ON CONTRACTS, supra note 3, at $$ 32.3-32.8; Amy B. Cohen, Reviving Jacob and Youngs, Inc. v. Kent: Material Breach Doctrine Reconsidered, 42 Vu. L. Rev. 65 (1997); Eric G. Andersen, A New Look at Material Breach in the Law of Contracts, 21 U.C. Davis L. Rev. 1073, 1079-92 (1988).

Both the first and the second Restatement of Contracts incorporate this modified version of the constructive conditions principle.” Section 237 of the second Restatement states it this way: “it is a condition of each party’s remaining duties to render performances to be exchanged under an exchange of promises that there be no uncured material failure by the other party to render any such performance due at an earlier time.” Note that only an “uncured material failure” to perform invokes the Restatement's constructive conditions principle.

Corbin on Contracts offers this alternative iteration of the modified construction conditions principle: “When justice seems to require that a contractor’s duty to perform should be conditional on some fact or event, the court should hold it to be a condition of the duty unless the parties clearly expressed an intention to the contrary.”” Note that in this variation, any “fact or event” may be a constructive condition whether or not it involves the performance of a contractual duty. Note also the absence of any objective test for identifying a condition, the specified standard being simply what “justice seems to require.”

Under the constructive conditions principle thus understood, therefore, a contracting party may, under the appropriate circumstances, be justified in withholding its own performance unless and until the condition occurs or is satisfied. What is the extent of the constructive conditions doctrine? How do courts discern what justice requires in the face of a partial failure to perform? How do they distinguish between material and immaterial breaches? And when does the failure or partial failure of the condition merely suspend the non-breaching party’s further obligations under the contract rather than operate as a complete release? These questions all remained to be worked out through the common law process.

In the two centuries following Kingston v. Preston, the U.S. authorities on materiality have generally analyzed a partial failure of performance by balancing a variety of factors to determine whether it is fair and just to treat the partial breach as a basis to suspend or discharge the other party’s contractual obligations. Differentiating a breach on this basis has been an elusive problem in contract law from Lord Mansfield’s days to the present.’ The balancing test sometimes sets up substantial performance as the antithesis of a material breach—nothing more than a way to express the conclusion that a particular partial breach is not material.” When used in this way, the

5 RESTATEMENT (SECOND) OF CONTRACTS $ 237 (Am. Law InsT. 1981); RESTATEMENT (FIRST) OF CON- TRACTS $ 274 (Am. Law Inst. 1932).

7 8 CORBIN ON CONTRACTS, supra note 3, $ 32.1.

8 See generally Andersen, supra note 4, at 1081-84.

10 See generally 14 WILLISTON ON CONTRACTS $ 44:55 (4th ed. 1993); Cohen, supra note 4, at 79 n.51;

Andersen, supra note 4, at 1135.

substantial performance concept is not a separate standard but simply a manner of expressing a balancing test conclusion.

An alternative line of authority, however, implies a substantial performance concept that goes beyond the vagueness of a multi-factor balancing test. In discussing substantial performance in this Chapter, I refer to this alternative principle. It recognizes that in some situations partial performance of a constructive condition may be substantial in a more meaningful way because, in some sense, the party complaining of the partial failure of performance has already received the essence of the bargained for exchange.!! In some sense, indeed, but what can that mean? How do contemporary courts discern substantial performance in this more literal way? As explained below, they have done so to a considerable extent by working out the contours of the concept in cases in which builders fall short of full or perfect performance under construction contracts.