This section contains the nature of the case and procedural background.

The Petersens (P) entered into a contract with Hubschman (D) for the purchase of a new house, which D was to build. The parties agreed to an offset of the purchase price for labor and material which P would supply. P paid a down payment of $10,000 and contributed $9000 worth of material and labor. During the course of construction, P became aware of a number of significant design and construction defects in the house. Although the defects would require significant time and effort to repair, they did not render the house uninhabitable or dangerously unsafe. D agreed to make repairs, but failed to do so, and later refused to do so. P refused to accept the house, and the parties did not go to closing. D invoked the forfeiture provision in the contract and informed P that they had forfeited both the deposit and the value of the labor and material contributed. The lower court found that D had not substantially performed on the contract and was not entitled to invoke the forfeiture provision, and that P was entitled to recover their deposit money. D appeals.

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