Liquidated Damage Provision

D.A. Nolt, Inc. v. The Philadelphia Municipal Authority, 2020 BL 199761 (E.D. Pa. May 28, 2020)

The Philadelphia Municipal Authority (the “Authority”) contracted D.A. Nolt, Inc. (Nolt) to renovate a building that would serve as the City’s new police headquarters. After Nolt had performed a portion of the renovation work, the Authority cancelled the project. Nolt sued the Authority, alleging that the Authority owed it $2.5 million for work performed before the project was cancelled. The Authority denied that payment was due, claiming that Nolt had delayed the project by 255 days and that a $10,000 per day liquidated damages provision in the contract thus offset Nolt’s claim.

Nolt moved for summary judgment on the Authority’s liquidated damages counterclaim. It argued that the provision was unenforceable because the $10,000 per day amount was not a reasonable forecast or approximation of the loss the Authority expected to suffer in the event of delay. Nolt cited testimony from the Project Director for the City’s Department of Public Property, who was responsible for finalizing the Authority’s contract with Nolt. The Director testified that he did not estimate the anticipated harm that might occur in the event of a delay in Nolt’s work. Rather, he determined that $10,000 per day was reasonable because prior City projects of a similar scope and magnitude included $10,000 per day liquidated damages provisions. The Director was not personally involved in the analysis which the City had undertaken on the referenced prior projects, and he did not personally analyze any of the calculations or estimates that the City completed for those prior projects.
Continue Reading Federal Court in PA Finds Liquidated Damages Provision Unenforceable Where the Per Day Liquidated Damage Amount Was Copied from Contracts for Prior Unrelated Projects Rather than a Project-Specific Forecast of Likely Damages

Abhe & Svboda, Inc. v. State of Michigan Department of Transportation, 2017 Mich. App. Lexis 1387 (August 29, 2017)

Contractor Abhe & Svboda, Inc. (“A&B”) entered into a contract with the Michigan Department of Transportation (“MDOT”) to clean and paint a portion of the Mackinac Bridge, with a contract completion date of October 30, 2009.  A&B missed the completion date by 644 days.  MDOT, therefore, imposed liquidated damages in the amount of $3,000 per day for each day by which completion was delayed.
In the trial court, A&B argued that MDOT’s assessment of liquidated damages was improper because a portion of the delay was caused by MDOT’s failure to approve a prerequisite to the work (scaffolding) and because site conditions were substantially worse than reasonably anticipated.

Continue Reading Michigan Court of Appeals Holds That Contractor Who Failed to Timely Seek a Time Extension Is Barred From Contesting Liquidated Damages

Boone Coleman Constr., Inc. v. Vill. of Piketon, 2016-Ohio-628, 2016 Ohio LEXIS 441 (Ohio Feb. 24, 2016)

A general contractor entered into a construction contract with a public agency for a road construction project with a $700 per day liquidated damages provision. The contractor completed the project over one year late, and was assessed $277,900 in liquidated damages. The original contract price was $683,300. The trial court granted summary judgment for the public agency, awarding the full amount of the liquidated damages. An intermediate appellate court overturned the ruling based upon an after-the-fact comparison of the total liquidated damages imposed in relation to the contract price, stating, “the amount of damages [as a whole] is so manifestly unreasonable and disproportionate that it is plainly unrealistic and inequitable.” The Ohio Supreme Court vacated the decision of the appellate court and remanded for further consideration.

Continue Reading Ohio Supreme Court Holds Reasonableness of Liquidated Damage Provision to Be Determined Based Upon the Parties’ Knowledge at Time of Contracting Rather than After Performance

King County v. Vinci Construction Grands Projects/Parsons RCI/Frontier-Kemper, JV, 2015 Wash. App. LEXIS 2735 (Nov. 9, 2015)

The Court of Appeals of Washington recently decided King County v. Vinci Construction Grands Projects/Parsons RCI/Frontier-Kemper, JV, a dispute between a joint venture contractor (the Contractor) and King County, Washington (the County). The dispute stemmed from problems that arose and significant delays that occurred during a major expansion of the County’s wastewater treatment system, known as the Brightwater project. The case illustrates the potential pitfalls of a contractor’s claim of differing site conditions.

Continue Reading Washington State Court Affirms $155M Jury Award Against Contractor and Surety Stemming from Claim of Default Due to Delayed Performance, Sustaining Denial of Contractor’s Differing Site Condition Defense

Boone Coleman Construction, Inc. v. Village of Piketon, 2014-Ohio-2377, 2014 Ohio App. LEXIS 2317 (Ohio Ct. App. May 22, 2014)

The Court of Appeals of Ohio held that a liquidated damages provision in a public construction contract constituted an unenforceable penalty because the amount of liquidated damages sought – nearly one-third of the total contract price – was “so manifestly unreasonable and disproportionate” to the contract price that it was unenforceable.

The defendant in that case was the Village of Piketon, Ohio, which solicited bids for a public construction project for roadway improvements. Plaintiff, Boone Coleman Construction, Inc., was the low bidder on the project. The parties entered into a contract under which Boone Coleman agreed to construct the project for $683,300. The contract further provided that if Boone Coleman had not substantially completed its work within 120 days, it would pay the Village $700 per day in liquidated damages until the project was substantially completed. Ultimately, Boone Coleman did not complete its work until 397 days after the agreed project completion date. Upon completion, the Village paid Boone Coleman $535,823 for its work.

Continue Reading Ohio Court of Appeals Holds Liquidated Damages Unenforceable Where Amount of Liquidated Damages Is Disproportionate to Contract Price

Cresci Constr. Servs., Inc. v. Martin
2013 Pa. Super. LEXIS 154 (Pa. Super. Ct. Mar. 28, 2013)

Martin hired Cresci to build a home in exchange for $184,730. The Contract included a liquidated damages clause that applied if Martin canceled the contract before Cresci began constructing the home. The Contract did not include any other liquidated damage clauses.

Continue Reading Superior Court of Pennsylvania Holds Award of Prejudgment Interest on Damages for Breach of Contract is Discretionary in Most Circumstances

Hovas Constr., Inc. v. Western Line Consolidated School Dist.
2012 Miss. App. LEXIS 556 (September 14, 2012)

The Board of Trustees of Western Line Consolidated School District entered into a $450,000 contract with Hovas Construction, Inc. for an addition and renovation work at the O’Bannon High School in Washington County, Mississippi. The contract required that the project achieve substantial completion by June 6, 2008 and included a project delay liquidated damages provision providing for damages of $500 per day. The project achieved substantial completion on July 15, 2008, thirty-nine days late, and the School District withheld $19,500 from Hovas as substantial completion liquidated damages. Hovas filed suit in the Circuit Court of Washington County. The Circuit Court concluded the $19,500 withheld was appropriate because the liquidated damage provision was enforceable and that the School District suffered actual damages.

Continue Reading Mississippi Court of Appeals Reviews Relationship Between Actual Damages for Delay and Liquidated Damages

Cleveland Construction, Inc. v. Kent State University
2010 Ohio 2906, 2010 Ohio App. LEXIS 2407 (Ohio Ct. App. June 24, 2010)

The Ohio Court of Appeals held that a contractor’s failure to submit claims in accordance with the contract’s dispute process and its failure to exhaust administrative remedies prescribed by statute would bar its claims regardless of assertions as to the futility or unfairness of such procedures.

Continue Reading Ohio Court Holds Contractor Claims Barred Because of Failure to Comply With Contract’s Claim Submission and Dispute Resolution Provisions

Excel Construction, Inc. v. HKM Engineering, Inc.
2010 WY 34 (Wyo. Mar. 23, 2010)

The Supreme Court of Wyoming recently reexamined its prior ruling barring a contractor’s assertion of negligence claims against design professionals economic loss rule.

The case pertained to a construction project for the replacement and improvement of water and sewer lines in the Town of Lovell, Wyoming. The Town of Lovell entered into an engineering services agreement with HKM Engineering, Inc. The Town also entered into a construction agreement with Excel Construction, Inc. No contract existed between HKM and Excel.

Continue Reading Supreme Court of Wyoming Declines to Modify Precedent Barring Claims by Contractor Against Design Professional Under the Economic Loss Rule

Bell BCI Co. v. United States
570 F.3d 1337 (Fed. Cir. Jun. 25, 2009)

Plaintiff, Bell BCI Company (Bell), a general contractor, sued the United States (the “Government”) for damages plus interest under the Contract Disputes Act for the unpaid balance of the contract price, unresolved change order claims, delay damages, labor inefficiency costs and profit thereon. Bell also asserted claims on behalf of five subcontractors.

Continue Reading U.S. Court Of Appeals for the Federal Circuit Rules Contractor Cannot Pursue Claims for Cumulative Impact, Holds Release Terms in Modifications Were Unambiguous