In construction disputes, one of the most important issues is whether the party claiming damages can adequately prove its damages at trial. Under Florida law, the burden is on the party seeking damages to prove its damages with a reasonable degree of certainty. While difficulty proving your damages may not be a bar to recovery, the award of damages cannot be based on mere speculation or guesswork. (For more on the burden of proof for construction damages under Florida law, click here.)

Florida law also specifies a “time of breach” standard that requires a party seeking damages based on defective construction work to calculate its damages as of the date of the breach of contract. A recent Florida appellate decision demonstrates the importance of proving damages under the time of breach standard.

Continue Reading Court Reverses Award of Damages to Owners Due to Lack of Evidence

Construction contracts often give one party discretion over certain aspects of the administration of a project. For example, a contract may give the owner the “sole discretion” to approve the use of contingency on a job or whether to give a contractor a time extension for an excusable delay.

Even where an owner has discretion to make specific determinations under the contract, there is generally at least one legal principle that limits how the discretion may be exercised—the implied duty of good faith and fair dealing.

I have written about how a contractor may breach the implied duty / covenant of good faith and fair dealing (click here for that post). This post shows how an example of how a public owner breached the implied duty of good faith and fair dealing by, among other things, improperly assessing liquidated damages.

Continue Reading The Implied Duty of Good Faith and Fair Dealing

A no-damages-for-delay clause can bar contractor claims for additional costs a contractor incurs due to delay on a project. Such clauses can be controversial, and at least one state—Virginia—has enacted a statute limiting the use of no-damages-for-delay clauses on public construction projects.

Regardless, many courts will enforce a no-damages-for-delay clause. But there can be exceptions to the enforcement of such clauses.

One of the most common exceptions is where the party seeking to enforce a no-damages-for-delay clause actively interferes with the other party’s completion of its work. A Florida federal court recently considered the active-interference exception in a dispute between a general contractor and a subcontractor.

Continue Reading The Active-Interference Exception to the Enforcement of No-Damages-for-Delay Clauses

Owners may argue that a contractor’s delay claim is barred because the contractor signed a release during construction of the project. Owners may also argue that a delay claim is barred because there was an accord and satisfaction regarding such a claim.

While the defenses of release and accord and satisfaction are often lumped together, there are nuances to both defenses. A tribunal recently considered both defenses in a decision that ultimately resulted in the denial of an owner’s motion for summary judgment based on a release a contractor signed during construction.

Continue Reading The Defenses of Release and Accord and Satisfaction to Delay Claims

Many construction contracts require a contractor or subcontractor to continue to work during a pending dispute between an owner and a contractor or a contractor and subcontractor. One purpose of requiring continued performance is to ensure that good faith disputes will not prevent the timely completion of a project.

Will a continue-performance-during-disputes clause prevent a contractor from ever stopping work on a project? A recent federal court case illustrates that under some circumstances, a contractor may not be required to continue to build a project even if the contract prohibits the contractor from stopping work.

Continue Reading Is a Contractor Always Required to Continue to Work During Disputes?

I have written many posts about the enforceability of liquidated damages clauses in construction contracts—a topic that interests many people in the construction industry.

Occasionally, you may see an owner argue that under a liquidated damages provision, the owner has the option to either assess liquidated damages for the late completion of a project or obtain its actual damages associated with a delay.

Recently, a federal court considered whether a liquidated damages clause gave a public owner the right to assess liquidated damages or obtain actual damages.

Continue Reading Does an Owner Have a Choice Between Liquidated and Actual Damages for Late Completion of a Project?

When a contractor or subcontractor is terminated for default, the terminating party may seek its damages for completing the defaulted contractor or subcontractor’s scope of work. The cost to complete the work will almost always exceed whatever money was left in the contract to complete the work.

Construction contracts will often expressly allow the terminating party to obtain the above excess completion costs. And under Florida law, “controlling weight should be given to the actual expenditures, made in good faith, that are necessary to complete the job covered by the original contract.” R.K. Cooper Builders, Inc. v. Free-Lock Ceilings, Inc.

But what happens when the excess completion costs include the cost to construct a second building when only one building was contemplated under the parties’ contract?

Will those excess completion costs be considered a form of consequential damages that may be barred under the parties’ contract? A federal court recently considered that question in United States ex rel. Sustainable Modular Management, Inc. v. JE Dunn Construction Company.

Continue Reading Does a Consequential Damages Waiver Bar the Recovery of Completion Costs?

A performance bond ensures that the bonded contractor or subcontractor will complete its work on a project. If a bonded contractor or subcontractor defaults, the surety should step in and exercise one of its options under the bond, which typically includes arranging for the completion of the defaulted contractor’s work.

Often, before a surety’s obligation to complete the defaulted contractor’s work is triggered, the surety must be given written notice of the contractor’s default. This gives the surety the chance to choose one of its options under the bond.

If an owner or contractor fails to provide any required written notice before hiring a replacement contractor or subcontractor to complete the work, the surety may assert the lack of written notice as a defense to a performance bond claim.

But what happens when an owner or contractor fails to timely provide the required written notice of default and the surety, once it learns of the default, indicates that the owner or contractor’s decision to hire a replacement contractor or subcontractor is fine?

In that situation, it’s possible that the surety may have waived its right to timely written notice. A recent federal court case—VEC, Inc. v. Joyce Electrical, Inc.—recently addressed such a situation.

Continue Reading Can a Surety Waive Its Right to Notice Under a Performance Bond?

There are many important provisions to include in joint-venture agreements between contractors pursuing a project. (For a list of five important provisions to include in joint-venture agreements, click here.) One important thing to address in a joint-venture agreement is how capital contributions will be handled.

Here are questions to consider when drafting a capital call provision in a construction joint-venture agreement:

  1. Who will determine that additional capital is required for the joint venture to complete the work?
  2. Who has to agree with that determination? In joint ventures with more than two contractors, will it be a simple majority vote or will unanimous consent be required?
  3. If unanimous consent is required, will one of the joint venture partners—likely the majority partner—have the right to make a unilateral capital call when/if the majority partner decides that without the capital, the joint venture cannot successfully complete the project?
  4. How will disagreements regarding capital calls be handled? If unanimous consent is required for capital calls, how can the partner who believes that additional capital is needed to complete a project challenge the other partner’s refusal to contribute capital to the joint venture? If a partner may make a unilateral capital call, how may the other partner challenge that capital call as unreasonable?

The above questions are worth considering and expressly addressing in a construction joint-venture agreement. If language addressing the above questions is not included, there may be disputes between partners in a construction joint venture as to capital calls.

There have been at least a couple of significant, recent disputes regarding this issue. One of those disputes is currently being litigated in a federal court lawsuit between two contractors—Archer Western and The McDonnel Group.

Continue Reading How to Address Capital Calls in Construction Joint-Venture Agreements

Builder’s risk insurance is a type of property insurance that covers damage to a project under construction. A builder’s risk policy is a no-fault form of insurance—it doesn’t matter who is responsible for the loss, builder’s risk will typically cover the loss.

There are times where a contractor’s faulty workmanship may cause a loss to a project covered under builder’s risk insurance. That can raise the following question—does builder’s risk cover the costs to repair or replace defective work on a project?

Much like many construction insurance coverage questions, the answer depends on the language of the builder’s risk policy. Many times, a builder’s risk policy will have an exclusion for faulty workmanship.

But some builder’s risk policies also have an endorsement that expands coverage—the LEG 3 provision. The LEG 3 provision is a type of extra coverage that an insured can purchase. It adjusts the coverage available under a builder’s risk policy to include certain losses and damages associated with defective work. (LEG is the abbreviation for the London Engineering Group, which is an association of insurers providing a forum for discussion and education addressing insurance topics.)

In January 2024, a Florida federal court issued a lengthy opinion analyzing whether a builder’s risk policy with a LEG 3 provision covers the costs associated with replacing/repairing defective work.

Continue Reading Does Builder’s Risk Insurance Cover Costs to Repair or Replace Defective Work?