Owner Delay Damages

In the event of the delay of a completion date of a construction contract, an owner may seek delay damages from the contractor.  The owner may seek either actual or liquidated damages, but usually not both, and the contractor must be at fault for the delay.  When damages flowing from breach of contract are easily ascertainable, or the damages fixed in the contract are clearly disproportionate to the injury, the stipulated sum will be treated as penalty and not enforced; but where the damages are uncertain or difficult, if not impossible to entertain, then the provision liquidating them in advance of loss will be enforced, if that liquidated amount is proportionate to the loss.  [1]

There is no particular formula to ascertain actual damages, as this is particular to the situation of the owner involved in the project.  For example, a homeowner’s actual damages may include loss of use of an addition to their home.  If the contract is for a public property, the owner’s actual damages may include loss of revenues, for patrons of the property.  In Cooperstein v. Patrician Estates, 117 A.D.2d 774, 499 N.Y.S.2d 423 (2d Dept. 1986), the court found an award of damages to be an appropriate remedy to compensate the homeowners for the contractors’ breach of their promise to timely construct a house on the premises and convey it to the rightful owners.  Because of the contractors’ unnecessary delay in completing the home and conveying it to the owners, the owners lost a fair amount of usage of their home and were found to be entitled to damages based on this loss.

An owner may also be able to recover interest on damages for delay.  Interest can be recovered from the date of the loss or injury incurred by the owner.  [2]  Interest rates and charges incurred beyond the reasonable completion date due to the contractor’s delay are generally recoverable.

Another type of damages an owner may be entitled to due to contractor caused delays is that of increased professional fees.  A delay in work may require other professionals involved in the job to pick up the slack and put extra time and work into the project.  The owner may then be able to recover the expenses it costs him to compensate the other professionals involved from the contractor who caused the delay in the first place.

In New York State, a liquidated damages clause in a construction contract unenforceable if it seeks to penalize a party for nonperformance and has no relation to the damages actually incurred.  If the damages based on breach of the contract are difficult or impossible to ascertain, the sum fixed by the parties is deemed to be liquidated damages and is enforceable and valid.  [3]

 


[1] X.L.O. Concrete Corp. v. John T. Brady and Co., 104 A.D.2d 181, 482 N.Y.S.2d 476 (1st Dept. 1983), order aff’d, 66 N.Y.2d 970, 498 N.Y.S.2d 799 (1985)

[2] Webster v. Culver Roadways, Inc., 79 Misc. 2d 256, 359 N.Y.S.2d 863 (Sup 1974)

[3] Associated General Contractors, New York State Chapter, Inc. v. Savin Bros., Inc., 45 A.D.2d 136, 139, 356 N.Y.S.2d 374 (3d Dept. 1974), opinion aff’d, 36 N.Y.2d 957, 373 N.Y.S.2d 555 (1975)

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