Town of New Milford v. Std. Demolition Srvcs., Inc., 212 Conn. App. 30 (2022)

The case involved cleanup and environmental remediation of a vacant factory contaminated with polychlorinated biphenyls and asbestos. The town of New Milford (Town) contracted with Standard Demolition Services, Inc. (Contractor) to perform the third phase of this cleanup and remediation. Following a series of disputes and project delays, the Town terminated the Contractor. At the time of termination, the Contractor had performed less than 10% of its scope of work. The Town then rebid the remaining work and hired a third-party to complete the project.

The Town filed suit against the Contractor for breach of contract to which the Contractor responded with multiple counterclaims. After a bench trial, the court entered judgment in favor of the Town, awarding it liquidated damages as provided in the parties’ contract, but refusing to award actual and consequential damages, finding that the Town was “limited in its claim of damages to those attributable under its liquidated damages provision.” Both parties appealed.

The Connecticut Court of Appeals affirmed the judgment in favor of the Town, but reversed the trial court’s holding that the Town’s recovery was limited to an award of liquidated damages. The Court of Appeals agreed with the Town that the liquidated damages provision was not the exclusive measure of damages for the Contractor’s breach of the contract.

The liquidated damages provision provided: “Failure of the Contractor to meet this established timeframe will result in liquidated damages being assessed in the amount of $2,000/day for each and every calendar day beyond the contract time limit.” The contract further provided that “in the event the Contractor fails to perform the work in a timely manner due to the Contractor’s poor planning, financial status, errors in construction or any other reason directly attributed to the Contractor’s circumstances, the [Town] may institute default proceedings “against the Contractor to recover damages and losses.

The trial court relied on the principle that “a seller may not retain a stipulated sum as liquidated damages and also recover actual damages” — in other words, a party may not “have its cake and eat it too.” The Court of Appeals, however, noted:

[A]lthough an unrestricted liquidated damages clause operates as a bar to the recovery of all actual or consequential damages for breach of the contract, parties to a contract may choose to narrow the scope of their liquidated damages clause by clearly expressing that intention either in the language of the clause itself or in the remaining language of the contract.

The Court of Appeals held the express language of the contract did not support the trial court’s conclusion that liquidated damages were the Town’s exclusive remedy for damages caused by the Contractor. Specifically, including a liquidated damages clause “does not, by itself, demonstrate a clear intent that such delay damages are the exclusive remedy available to the [Town] under the contract, which must be viewed in its entirety.” The Court of Appeals found that the separate contract provision that expressly allowed for the recovery of “damages and losses” resulting from the Contractor’s actions evidenced a “contractual intent to allow for the recovery of nondelay damages and losses, in addition to the liquidated damages due to delays.”

The Court of Appeals reasoned its finding does not provide the Town a double recovery:

When, as here, a liquidated damages provision is limited in its application to damages resulting from delays and does not expressly provide that liquidated damages are the exclusive remedy, it does not prevent the recovery of actual damages for items to which the liquidated damages provision does not apply, i.e., nondelay damages. … It stands to reason that, so long as the predicate for both awards is not the same, the recovery of both liquidated damages and actual or consequential damages will not result in an impermissible double award.

Remanding the case for a new hearing on damages, the Court of Appeals noted the trial court would need to determine, in part, whether the costs associated with rebidding the project were either delay damages (and therefore included in the recovery of liquidated damages) or nondelay damages caused by the Contractor’s failure to perform, rather than its delayed performance (and therefore appropriate for recovery).

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