These provisions offer an easy method for allocation of damages associated with construction disputes, documentation of firm expectations for all parties involved, and avoidance of significant proof issues. Second, as for the amount, one historical rule of thumb used by some practitioners is to calculate the liquidated damage amount at the rate of to per day per 0,000 of contract price. Wallenfang, “Liquidated Damages for Delay in Construction Contracts,” . Generally, to be enforceable, an exculpatory clause must be clear and unambiguous. The determination of whether a contractual provision for damages is a valid liquidated damages provision or an unenforceable penalty clause is a question of law. This amount approximates the investment value of 7.3 to 9.1 percent if that sum were invested elsewhere, and is based on the theory that one wouldn’t make the investment in the first place if the project didn’t have at least as much value to an owner as an alternative investment. If there is any ambiguity in the exculpatory language, the no-damage-for-delay clause likely will be adjudged inapplicable or unenforceable.
The court found that this was a delay not contemplated by the parties and refused to enforce a no-damage-for-delay clause. However, there remains substantial uncertainty about the scope of this term. We hope the citations above can help you safely navigate through three of the most recurring delay damage issues.
A delay not contemplated by the parties was found in , 431 A.2d 569 (D. 1981), in which a spray fireproofing subcontractor was not able to perform its work because of a series of mix-ups in the sequence of plans prepared by the contractor. Two good starting points are the definition in section 715 of the Uniform Commercial Code, and the American Institute of Architects’ definition in AIA form A201 (2007), section 15.1.6. Bruner and O’Connor suggest that “foreseeability” might be viewed more broadly in modern construction contracts than in other commercial contracting relationships for several reasons:(1) the sophistication of the parties; (2) the detail with which construction contracts are prepared; (3) the flexibility built into construction contracts to make changes or to give definition to contract requirements during construction; (4) the frequent practice of giving contractual definition to the type and amount of damages awarded for certain breaches; (5) the recognized “hurly-burly” of the construction process; and (6) the common industry appreciation for the likely consequences of most breaches. Thus, when entering into a construction contract, both the owner and contractor should assume that only truly uncontemplated damages will be determined to be “consequential.”Conclusion Delay damages will always be one of the most challenging aspects of construction law.
The court reviewed the clause from a substantive perspective — whether its terms were so one sided as to be grossly disproportionate to actual damages as to be oppressive — and found it enforceable.
The court's language expressly abandoned the heightened judicial scrutiny that had characterized prior Utah case law on the subject.
Other court decisions appear more willing to permit the parties the freedom to contract and stipulate an amount to compensate for breach.
In an opinion published in August, the Supreme Court of Utah acknowledged confusion in its own (and other states') courts about the test for enforceability of liquidated damages. Iowa 1973), the court held that to be guilty of active interference, the public agency would need to commit “some affirmative, willful act, in bad faith, to unreasonably interfere with plaintiff’s compliance with the terms of the construction contract.” Consistent with the foregoing approach, many courts that have found “active interference” have based their conclusion on , 668 F.2d 435 (8th Cir.— Illinois Supreme Court, 1917 Two recent case decisions cover the enforceability of liquidated damages amid claims that they operate as unenforceable penalties.For well over a century, enforceability has been a live issue in contract litigation.In August, Utah's Supreme Court revisited the issue and appeared to soften somewhat the amount of judicial scrutiny of liquidated damages clauses.The court opinions addressing the issue of enforceability are not unique to public .