Fact Pattern:

Developer had an option to purchase a five-acre parcel named The Highlands in City from Owner, and was planning to build a residential development there. Developer could not proceed with the project until City approved the extension of utilities to The Highlands parcel.In order to encourage development, City had a well-known and long-standing policy of reimbursing developers for the cost of installing utilities in new areas.

Developer signed a contract with Builder for the construction of ten single-family homes on The Highlands parcel. The contract provided in section 14(d), All obligations under this agreement are conditioned on approval by City of all necessary utility extensions.

During precontract negotiations, Developer specifically informed Builder that he could not proceed with the project unless City followed its usual policy of reimbursing the developer for the installation of utilities, and Builder acknowledged that he understood such a condition to be implicit in section 14(d). The contract also provided, This written contract is a final statement of the agreement between the parties hereto.

In a change of policy, City approved necessary utility extensions to The Highlands parcel, but only on the condition that Developer bear the entire cost, which was substantial, without reimbursement by City. Because this additional cost made the project unprofitable, Developer abandoned plans for the development and did not exercise his option to purchase The Highlands parcel from Owner.

Builder, claiming breach of contract, sued Developer for the $700,000 profit he would have made on the project. In the meantime, Architect purchased The Highlands parcel from Owner and contracted with Builder to construct a business park there. Builder's expected profit under this new contract with Architect is $500,000.

What arguments can Developer make, and what is the likely outcome, on each of the following points?

Argument Number 1. Developer did not breach the contract with Builder. Discuss.

Argument Number 2. Developer's performance was excused. Discuss.

Argument Number 3. In any event, Builder did not suffer $700,000 in damages. Discuss.