A bed and breakfast hires an artist to paint murals in five bedrooms. Payment is due upon satisfactory completion of all five rooms. The owner approves the first three rooms but asks for a different color palette for the remaining two. The artist refuses and terminates the contract. What is the measure of damages?

• A. The full contract price for all five rooms.
• B. The reasonable value of the artist’s services for the first three rooms, less damages for not painting the last two rooms.
• C. The reasonable value of painting all five rooms.
• D. Actual costs to hire another artist for the remaining two rooms.

Answer: (B)

The key idea is that damages in a contract for services with partial performance are based on the value of what was actually delivered to date, offset by the loss from the uncompleted portion. Here, the owner approved and thus received value from painting three rooms. The contract required all five rooms to be completed, so there’s a loss for the two rooms that were not painted because the artist refused to finish and terminated.

Thus damages are measured by the value of the services for the three rooms that were completed, minus the damages caused by not painting the last two rooms (i.e., the value or cost associated with those two uncompleted rooms). This captures putting the owner in as good a position as possible given partial performance.

The other options aren’t correct because they would either overcompensate for a partially performed contract (the full contract price for all five rooms) or ignore the value of the completed work, or focus only on the cost to hire a substitute without accounting for the already delivered work. Painting all five rooms never occurred, so valuing all five or the full contract price isn’t appropriate, and merely citing the substitution cost neglects the value of the completed portion.