Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 12

Jamison Well Drilling, Inc. v. Pfeifer
Court of Appeals of Ohio, Third District, 2011 Ohio 521 (2011).
FACTS Jamison Well Drilling, Inc., contracted to drill a water well for Ed Pfeifer in Crawford County, Ohio. Pfeifer agreed to pay Jamison $4,130 for the labor and supplies. Jamison drilled the well and installed a storage tank. The Ohio Department of Health requires that a well be lined with a minimum of twenty-five vertical feet of casing, but Jamison installed only eleven feet of casing in the drilled well. The county health department later tested the water in the well for bacteria and repeatedly found that the levels were too high. The state health department investigated and discovered that the well's casing did not comply with its requirements. The department ordered that the well be abandoned and sealed. Pfeifer used the storage tank but paid Jamison nothing. Jamison filed a suit in an Ohio state court against Pfeifer to recover the contract price and other costs. The court entered a judgment for Jamison for $970 for the storage tank. Jamison appealed.
ISSUE Does Pfeifer have to pay the full contract price to Jamison when the well cannot be used because it does not meet health department standards?
DECISION No. A state appellate court affirmed the lower court's decision. The judgment had struck a balance that realized the completed construction project had value and the storage tank was functional, but the well was not usable.
REASON The court reasoned that the parties entered into a contract for the drilling of a well for a certain price. The work also included the installation of a storage tank. The drilled well was not in compliance with state law and consequently had to be sealed and abandoned. Pfeifer may have assumed the risk that the well could not be used due to inadequate water production, but he did not assume the risk that it would have to be sealed for noncompliance with state law.
Thus, Jamison was not entitled to the full contract price of $4,130. Yet the storage tank was usable, and Pfeifer had kept it. Because it would not be fair to allow Pfeifer to keep the tank without paying for it, Jamison should recover the cost of the tank only.
WHAT IF THE FACTS WERE DIFFERENT? Suppose that Pfeifer had paid Jamison for the work before the well was ordered sealed and had later filed a suit to recover for breach of contract. What would have been the measure of damages?