A contractor fails to complete a $40,000 residential project in Georgia, leaving $18,000 worth of work undone. The homeowner hires another contractor to complete the work for $22,000. What is the homeowner's actual damages for recovery fund purposes?
Correct Answer
A) $4,000
The actual damages would be the difference between the cost to complete ($22,000) and the value of work remaining ($18,000), which equals $4,000 in additional costs incurred.
Why This Is the Correct Answer
Actual damages in this context represent the net out-of-pocket loss to the homeowner beyond what was already owed. The homeowner still needed $18,000 worth of work completed, but paid $22,000 to a replacement contractor—an overage of $22,000 − $18,000 = $4,000. That $4,000 is the incremental harm directly caused by the original contractor's breach, and it is the amount recoverable from Georgia's Recovery Fund.
Why the Other Options Are Wrong
Option B: $40,000
$40,000 is the total original contract price. The homeowner is not entitled to recover the full contract value because work had already been performed (the first $22,000 worth, since $18,000 remained). Awarding $40,000 would overcompensate the homeowner.
Option C: $18,000
$18,000 represents the value of the unfinished work at the original contract rate. The homeowner did not simply lose $18,000—they actually spent $22,000 to get that work done, so using $18,000 alone understates the actual loss.
Option D: $22,000
$22,000 is the amount paid to the replacement contractor. This overstates the damages because the homeowner would have owed the original contractor approximately $18,000 for that remaining work anyway. The true additional cost is only $4,000.
Memory Technique
Actual damages = Replacement cost − Remaining contract value. Think of it as the 'upcharge': how much MORE did the homeowner have to pay compared to what they owed? $22,000 paid − $18,000 owed = $4,000 extra = actual damages.
More Georgia Questions
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Which situation would require a Georgia contractor to obtain workers' compensation insurance?
A contractor receives a stop work order from the local building official. The contractor continues working despite the order. What is the typical penalty range?
A contractor's license expires on June 30th. They submit a renewal application on July 15th. What additional requirement must they meet?
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A contractor's annual payroll is $450,000. If the workers compensation rate is 8.5 per $100 of payroll, what is the annual premium?
What is the threshold amount above which a contractor must be licensed in Georgia?
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