In the event of substantial performance by a contractor, what must the breaching party recover?

When a contractor substantially performs their obligations under a contract, they have fulfilled enough of the terms to warrant compensation, albeit with some deficiencies. In such cases, the nonbreaching party—who has not received the complete performance as per the contract—retains the right to recover damages incurred because of the breach.

The correct answer involves the breaching party recovering the contract price minus any damages the nonbreaching party has sustained due to the imperfections in the performance. This approach balances the interests of both parties: the contractor is compensated for the work they have completed while also ensuring that the nonbreaching party is not left at a financial loss due to the contractor's failure to fully comply with the contract terms.

In a situation where there’s substantial performance, the law generally permits recovery because it acknowledges that while the performance was not perfect, it was significant enough to justify compensation, minus the damages caused by the deficiencies. This principle helps to uphold contractual obligations while also encouraging the completion of contractual agreements even if there are minor issues in execution.