- posted: Sep. 05, 2024
An increase in construction activity can be have positive and negative consequences, leading to economic growth but also to potential project delays. With more projects being undertaken, the demand for materials, labor and specialized equipment rises, often causing shortages and resulting postponements. These delays can frustrate customers who expect timely completion and can cause them losses. When this happens, there are legal remedies available, ranging from financial credits to termination of contracts and awards of damages.
The contractor’s liability and the customer’s remedies depend initially on whether the delay is excusable or inexcusable. Excusable delays are those beyond the control of the contractor, such as extreme weather conditions, unforeseen site conditions or acts of government authorities. These delays are often justifiable and may not result in penalties if the contractor has taken reasonable steps to mitigate their impact. Inexcusable delays, by contrast, arise from the contractor's negligence, mismanagement or lack of resources. Examples include failure to procure materials on time or to provide adequate staffing..
To protect both parties, construction contracts should explicitly address potential delays and outline remedies. This includes defining what constitute excusable and inexcusable delays, establishing notice requirements for delays and specifying the methods for calculating damages.
One common contractual provision is the specification of liquidated damages. These are predetermined amounts that the contractor agrees to pay the customer for each day the project is delayed beyond the agreed-upon completion date. This method simplifies compensation by avoiding the need to prove actual damages, making it easier to enforce and providing a clear incentive for timely completion. However, the amount must be a reasonable estimate of potential damages. Otherwise, it could be deemed a penalty and thus unenforceable.
Alternatively, actual damages refer to the specific losses incurred by the customer due to the delay, such as lost revenue or additional rental expenses. Calculating actual damages can be complex and requires detailed documentation and proof of losses, which can be challenging and contentious. The contract can also provide for consequential damages, which are those that indirectly result from performance or project completion delays.
Contracts may also specify other remedies, such as withholding payments, requiring the contractor to expedite work at their own expense or even terminating the contract. These provisions ensure that customers have various options to protect their interests if delays occur.
The distinction between liquidated and actual damages, and the inclusion of other remedies, must be carefully drafted to ensure they are enforceable and reflect the parties' intentions. Furthermore, customers must understand their rights and obligations under the contract to effectively pursue any claims for delays.
Navigating construction delays and disputes can be complex. A customer should be represented by an experienced construction attorney who can review and negotiate the contract, ensuring that it contains clear and enforceable provisions regarding delays. An attorney can also advise on potential risks and represent the customers’ interests in case of a dispute.
Clay Parker, Esq., based in Orlando, represents property owners and contractors in construction projects throughout central Florida. Call [ln::phone] or contact us online to schedule an initial consultation.
