Question: Engineer E and Owner O are engaged in contract negotiations for E to design and build a building for O. The proposed contract is for $150,000. The estimated duration of the turnkey project is 15 months.
After reaching an oral agreement of the above, O tells E that they should get together over the next few weeks to hammer out the contract language details for a formal written contract. E proceeds and completes approximately 30% of the design work (at a cost of $3000) when negotiations break off over "technicalities." O orally tells E to stop work as they cannot reach an agreement. E's budget estimated a $12,000 profit for E for the project. Assume for this question that the design/build turnkey project is NOT severable.
1. E sues O for the entire $150,000. Who wins, what, and why?
2. ADDITIONAL FACTS: O mails a check for $3,000 to E with a letter stating that the check is "to cover your costs for the work performed under our canceled agreement for the $150,000 project." E sues O for the remaining $147,000. O countersues asking for the return of the $3,000. Who wins, what, and why?