Are liquidated damages clauses in construction contracts enforceable? That’s a question that is often litigated in construction disputes.

It’s not surprising that some of the most popular articles on this blog address examples of courts refusing to enforce liquidated damages clauses in a construction contracts. For two examples of Florida courts finding liquidated damages clauses unenforceable, click here and click here.

Generally, liquidated damages provisions are enforceable. But there are circumstances where courts will refuse to enforce such a provision. Under Florida law, a liquidated damages clause will not be enforced if a court concludes it is a penalty clause. There is a two-part test for determining whether a liquidated damages clause will be stricken:

(1) the damages flowing from a breach of contract are not readily ascertainable; and

(2) the daily rate of liquidated damages is not grossly disproportionate to the damages that might be expected to flow from a breach.

While not a Florida case, a Georgia court recently considered whether a liquidated damages clause in a construction contract was enforceable.

Continue Reading Georgia Court Refuses to Enforce Liquidated Damages Clause

Constructive acceleration occurs when a project owner requires the contractor to comply with the original completion deadline, even though the contractor has encountered an excusable delay.

Some courts have held that there are three “essential elements” of a constructive acceleration claim: (1) the contractor encountered an excusable delay, (2) the owner issued an acceleration order, and (3) the contractor incurred additional costs to accelerate its work.

Sometimes there are disputes about whether the owner or prime contractor issued an acceleration order.

Recently, a federal court considered whether a subcontractor adequately alleged a constructive acceleration claim against a prime contractor, which included a discussion of implied acceleration orders.

Continue Reading What Is Constructive Acceleration on a Construction Project?

The enforcement of liquidated damages provisions is a topic that gets a lot of attention in construction-contract disputes. Some of the most popular posts on this blog include examples of courts refusing to enforce liquidated damages provisions. (Click here for one example and click here for another example.)

One reason a court may refuse to enforce a liquidated damages provision is because the specified daily rate of liquidated damages is “grossly disproportionate” to the actual damages that are expected to be suffered due to the contractor not completing the project on time.

In addition, even if a liquidated damages clause is enforceable, it is possible that an owner can waive the right to claim liquidated damages. Under Florida law, to establish waiver, a party must show an intention to give up a known right. A waiver can be express or implied through conduct.

A federal court recently considered whether a project owner waived its right to seek liquidated damages as a matter of law.

Continue Reading Can a Project Owner Waive Its Right to Claim Liquidated Damages?

When a contractor bids a job, it does so based on a planned sequence of work and productivity of job labor. There are many issues that can arise while building a project that affect labor productivity, and many of those issues are not the contractor’s responsibility. The terms of the contract will often dictate whether a loss of productivity is compensable.

A contractor that suffers a loss of productivity may be entitled to additional compensation. Many methods have been used to calculate loss-of-productivity damages.

In JH Kelly, LLC v. AECOM Technical Services, Inc., a federal court recently considered several different methods for calculating a loss of productivity on a project.

Continue Reading Three Ways to Potentially Calculate Lost Productivity Damages

The governor of Florida recently signed Florida Senate Bill 1718 into law. The bill includes Florida’s new E-Verify law. Under the new law, private employers must use the federal government’s E-Verify system to confirm each new employee’s eligibility for employment within three business days after the new employee starts work. The above requirement applies to all private employers with 25 or more employees, including construction contractors and subcontractors.

Continue Reading How Florida’s New E-Verify Law Will Affect Government Construction Projects

To win on a breach-of-contract claim, the party asserting the claim must prove that the other party to the contract caused the non-breaching party to incur damages. In construction disputes, the non-breaching party (e.g., a contractor or subcontractor) will often claim that it incurred lost profits due to the other party’s breach.

For example, if an owner wrongfully terminates a contractor, the contractor may be entitled to the profit that it was going to make on the project but for the owner’s termination of the contract. But to obtain those lost profits, the contractor will have to offer supporting evidence.

Continue Reading How to Prove Lost Profits in Construction Disputes

Frequently, the parties involved with building a construction project believe that one of the other parties is acting unreasonably. There are times where one of those parties — the owner, the prime contractor, a subcontractor, or a design professional — act so unreasonably that they may violate the implied covenant of good faith and fair dealing.

Under Florida law, every contract contains an implied covenant of good faith and fair dealing. The purpose of the implied covenant of good faith and fair dealing is to protect the reasonable expectations of the contracting parties in light of their express agreement.

While not a Florida case, a recent federal court case that went to trial in Idaho shows an example of a prime contractor acting unreasonably with its subcontractors on a federal government project.

Continue Reading How the Implied Covenant of Good Faith and Fair Dealing Can Apply in Construction Disputes

When an owner terminates a prime contractor or a prime contractor terminates a subcontractor, it almost always costs more for the terminating party to complete the work under the contract. Fortunately, if the termination was proper, the owner should be able to recoup the extra cost to complete the work from the terminated contractor. The same is true when a contractor terminates a subcontractor.

Often, the terminated party will argue that the excess completion costs were unreasonable. Generally, the burden will be on the terminated party to prove that the cost to complete the work was unreasonable. This can be very difficult to prove.

Continue Reading Construction Completion Costs and the Burden of Proof

When a contractor’s work on a project is impacted due to no fault of the contractor, the contractor may consider bringing a claim to get paid additional compensation for that impact. Oftentimes, the contractor may assert that its work was delayed, disrupted, or it was otherwise more inefficient than planned.

A contractor asserting a delay, disruption, or inefficiency claim against a project owner can expect the owner to look to any available defenses it has to the claim. After having read many cases involving these types of claims, one can see that the same defenses are frequently asserted.

The top three defenses to delay, disruption, and inefficiency claims include failing to timely submit a contractually compliant claim, waiver / release, and the contract expressly barring such claims. The rest of this post will provide a quick overview of those common defenses.

Continue Reading Top Three Defenses Against Delay, Disruption, and Inefficiency Claims

I write a fair amount about construction claims, and I frequently emphasize the importance of properly proving damages in connection with construction claims (e.g., a general contractor only being awarded $22,000 on its $1.3 million claim against a subcontractor, in part, because the general contractor failed to adequately prove its damages).

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.

A recent federal court trial illustrates the difficulty contractors and subcontractors can have proving claims against each other for breach of a construction contract.

Continue Reading The Burden of Proof for Construction Damages