Liquidated Damages 2

[cyds]

I have exceeded the interim completion date on a project. The owners representative wants to assess a penalty of $1,000 per working day for each day we exceed the interim completion date. We encountered unforeseen conditions and excessively wet weather. What are my options when negotiating?

P.S. The owners representative is both savvy and unreasonable.

 

[civilperson]

Produce a schedule with a timely completion and an average inclement weather component for this area and season. Show accelerated activities by application of more forces and overtime when the float is exceeded due to bad weather. Make claim with your insurance for weather damages. Include all this evidence in an arbitration brief.

 

[soiledup]

If ther were unforseen ground conditions, why not make a claim against the site investigation company?

 

[Maury]

I am assuming that The $1000 per day as liquidated damages is a requirement of the contract, not something the owner's representative is making up on his own. He may not be unreasonable, his hands may be tied by the terms of the contract. If the owner's representative is a consultant, you might try asking for a meeting directly with the owner. What does your contract say about extensions for weather and unforseen conditions? Are there any provisions for mediation or arbitration to settle disputes?

In the future, if you encounter unforeseen conditions, put the owner on notice immediately, don't wait till the end of job or an interim completion date.

 

[cvg]

Maury makes a good point. At this point, very late in the game - you are not in a good position to bargain and will have to prove that the weather caused the delays, not your management of the project. However, just because the contract allows the liquidated damages, doesn't mean he is bound to enforce it - he may be unreasonable. But if you put yourself in the owners position, he may be losing money each day he is not able to use the unfinished project.

 

[civilperson]

In my career, three instances of liquidated damages have been disputed by the contractor in two state courts and one arbitration proceeding. The ruling was similar in each instance: NO liquidated damages can be assessed if there is not an equivant bonus for early completion. The ruling goes against the author of the contract document,(owner and his engineer), if the provisions are one-sided and unfair or unequal.

 

[cvg]

civilperson - disallowance of liq. damages may be a precedent in your state, however liquidated damages are writtten into the general conditions for the DOT and for standard city and county work in this state and are currently required all the time for all public works projects, without any specific requirement to have a bonus also. That said, I do believe that a bonus is a very good incentive that most contractors will work to achieve if possible when it is offered.

 

[Maury]

To my knowledge, a Contractor cannot be assesed a penalty unless there is an equivalent bonus provision, but liquidated damages are not automatically considered a penalty and can be assessed even if no bonus is offered. I believe that a liquidated damage provision may be overturned for a variety of reasons, such as it being used as a punishment rather than a just compensation to the injured party.

According to Wikipedia, two conditions must be met: "First, the amount of damages identified must roughly approximate the damages .... Second, the damages must be sufficiently uncertain at the time the contract is made that such a clause will save both parties the future difficulty of estimating damages."

If the owners representative is using liquidated damages as a penalty, and no damages occured, then it would not appear to be enforceable.

 

[DRC1]

Liquidated damages are enforcable and should allways be considered when encoutering any delay. The concept of liquidated damages is that the owner will experience costs due to a delay due soley to the contactor or events reasonably anticipated by the contractor. The damages do not have to match the costs incurred by the owner, but must be a reasonable approximation with a rational derivation. Many contracts are not.You say this is an interim project milestone - does he owner realy absorb any cost due to a delay at this point if the schedule for the project were recovered? Second any delays for which the owner is responsible (late plans, design changes, access rights) are excusable, if not compensible. However, if you have signed change orders for work that has not added additional time to the contract, it will be very hard to claim delay. Also contracts generally have notice provisiuons for changes. Although these are enforcable, they often ae not as enforcible as owners would like to believe. As long as the owwner or his rep has reasonable knowledge of the delay, you can work from there. Hopefully you have documented these delays with the owner. It is possible to have excessive bad weather as a Force Majure(and therefore excusable). Documentng excessively bad weather does take work and really, unless blatent, can be a matter of opinion.
If you are being assessed liqudated damages, you should have a GOOD construction attorney involved now.As in today.
Good Luck

 

[LCruiser]

soiledup put it succinctly - if there were unknown conditions the Owner could have foreseen with reasonable investigation, you may be entitled to extended overhead, along with the excusable delay. Remember, he had much longer to investigate the underground conditions than you had to bid the job...

P.S. "Unreasonable" and "savvy" are mutually exclusive.

 

[LCruiser]

Keep us posted...

 

[BigH]

Most contracts (with which I have been associated) require you to indicate claims (or intention to claim) within a certain time frame (28 days, for instance) of the 'onset' of the problem. If you didn't provide contractual notice you may not be able to claim and claim delays are what you want to use to "extend" the contract completion date.

 

[fattdad]

To make a claim based on "excessively bad weather" you would have to show to what extent your schedule accounted for bad weather. If you developed a schedule, threw bad-weather days onto the schedule (via a random number method) and then prepared interim or final dates, you did the right thing. If the actual number of bad weather days exceeded the norm (i.e., what a reasonable person would have forecasted) then you have a basis to defend the revised (i.e., actual) schedule.

On the matter of soil conditions - if you tried to work on wet subgrades and then took the soft soil conditions to be a "changed condition", don't try sticking it to the geotech. It's hard enough in our business to "see" what's going on down there with borings every 200 or 300 ft in plan dimension.

Good luck.

f-d

¡papá gordo ain’t no madre flaca!

 

[epoxybot]

If you are a small to medium sized contractor and have not before had need of a attorney with a knowledge of construction, you can always go to the local builders exchange for a referral. In my experience their are always a few that rent office space.

 

[cyds]

Thanks to all of you who responded. As it turned, out the owner and his representative came to their senses. There will be no L.D.'s after all. They even extended the final completion date to account for days lost to rain, unforeseen conditions, extra work etc...