Jacob & Youngs, Inc. v. Kent 1921 S. Ct. of N.Y.

Facts: Kent contracted with Jacobs & Youngs to build a mansion using wrought iron pipes from the Reading Company for plumbing throughout the house. After construction was completed, Kent moved into the home and discovered some of the pipes were not the Readings brand. Jacob & Youngs inadvertently used the Cohoes brand wrought iron pipes. Coheos pipes were of comparable quality and appearance.

Issue: Did Jacob & Youngs substantially perform when they installed Cohoes pipes, rather than Reading pipes as promised in the contract?

Rule: The parties did not use express language in the contract concerning the Reading Pipes. The court found that the use of other brands was not fraudulent or willful and because the alternative brand was considered comparable in cost and value, the builder substantially performed. In this case the cost for damages was nominal, whereas the cost for forfeiture would be unfair. The courts looked at the Reading Pipe installation clause as a promise rather than as a condition. To avoid this type of problem the parties must expressly state in the contract that the terms and conditions are expressly agreed to and that all conditions are material; and if the conditions are breached, then the breaching party would face forfeiture.

*If you have a material breach, then the condition was NOT substantially fulfilled and the homeowner’s duty to pay for the new home has not arisen.

*If you have a minor breach, then the homeowner must proceed to perform because the condition to his duty was substantially fulfilled.

from Restatements §241

To determine material performance look at:

1. the extent to which the injured party will be deprived of the benefit he reasonably expected;

2. the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;

3. the extent to which the party failing to perform or to offer to perform will suffer forfeiture;

4. the likelihood that the party failing to perform or to offer to perform will cure his failure, taking into account of all the circumstances including any reasonable assurances;

5. the extent to which the behavior of the failing party to perform or to offer to perform comports with standards of good faith and fair dealing.