Legal Definitions - cost of completion

Cost of Completion refers to the monetary expense required to finish a project, promise, or contractual obligation that one party failed to complete as agreed.

This concept most frequently arises in contract law, particularly when one party breaches a contract by not fulfilling their promised duties. When a court awards damages based on the cost of completion, it aims to put the non-breaching party in the position they would have been in had the contract been fully performed. Essentially, it provides the funds necessary for the injured party to hire someone else to complete the work or supply the goods originally promised.

Here are some examples illustrating the cost of completion:

• Home Renovation Project: Imagine a homeowner hires a contractor to build a new deck and outdoor kitchen. The contract specifies high-quality materials and a specific design. The contractor builds the deck but then abandons the project before installing the kitchen appliances, countertops, or plumbing, citing unforeseen financial difficulties. The homeowner then has to hire a different contractor to complete the outdoor kitchen according to the original plans.

  In this scenario, if the homeowner sues the original contractor for breach of contract, a court might award the homeowner the cost of completion. This would be the amount of money the homeowner reasonably had to pay the new contractor to finish the outdoor kitchen exactly as outlined in the initial agreement, covering the expenses for materials, labor, and installation that the first contractor failed to provide.

• Custom Software Development: A small business contracts with a software firm to develop a bespoke customer relationship management (CRM) system tailored to their unique operational needs. The software firm delivers a partially functional system that lacks several critical features specified in the contract, such as integration with existing accounting software and a comprehensive reporting module. The firm then declares it cannot complete the remaining features.

  If the small business sues the software firm, a court could award the cost of completion. This would represent the reasonable expense the small business incurs to hire another software development team to build and integrate the missing features and bring the CRM system to the full functionality originally promised in the contract. This ensures the business receives the complete, functional system it contracted for.