Consequential Damages Provisions in Construction Contracts: Legal Issues (2022) / Chapter Skim
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NCHRP LRD 88 3 CONSEQUENTIAL DAMAGES PROVISIONS IN CONSTRUCTION CONTRACTS: LEGAL ISSUES Polly Jessen, Riley Cutner-Orrantia, Brandon Rattiner, and Diane Sung, Kaplan Kirsch & Rockwell LLP, Denver, CO; and Adam Giuliano and Emily Eads, Kaplan Kirsch & Rockwell LLP, New York, NY INTRODUCTION When a construction contract is breached or liability is allocated in accordance with its terms,1 through an indemnity provision, for example, three types of damages are generally implicated: (i) direct or general damages; (ii)
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4 NCHRP LRD 88 to be direct results of a breach, but they are not remote enough to be unforeseeable results of a breach. As a result, contracting parties and courts still struggle to locate the line between direct and consequential damages, despite decades of cases trying to further distinguish these categories.9 Yet, a conventional wisdom about whether a kind of loss is direct or consequential has emerged.
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NCHRP LRD 88 5 Reynolds shows that the conventional categorization of repair costs as direct damages is of limited value. Without clear draing, it can be dicult to show how repair costs are distinct from collateral costs that may ow from a defective product.
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6 NCHRP LRD 88 several projects. Moreover, in cases where a parent company of a contracting party becomes insolvent, it becomes even harder to demonstrate insolvency was the consequential result of a speci c project or breach.
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NCHRP LRD 88 7 lost during the summer.34 Perini challenged the award in court, arguing inter alia, that such lost pro ts were not foreseeable as "it would not have accepted such a great risk for the minimal fee of $600,000."35 Citing testimony that the owner clearly established the façade was meant to "increase its pro ts by attracting more patrons from the [adjacent] boardwalk," the court stated that "Perini had to be aware of [the owner's]
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8 NCHRP LRD 88 c. ConsensusDocs A coalition of design and construction industry associations created ConsensusDocs, a collection of standardized contract documents that aim to incorporate best practices and fair risk allocation.
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NCHRP LRD 88 9 FAR's unique rules governing consequential damages. Most importantly, the federal government can terminate a procurement contract for convenience (i.e., without cause)
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10 NCHRP LRD 88 requires that public works contracts include a provision allowing the state and private contractors to negotiate "for the recovery of damages related to expenses incurred by the contractor for a delay for which the state governmental unit is responsible, which is unreasonable under the circumstances and which was not within the contemplation of the parties to the contract."64 California's public contract code declares provisions in public contracts that state time extensions are the sole remedy for delay "shall not be construed to preclude the recovery of damages by the contractor or subcontractor" when a delay was unreasonable and not within the contemplation of the parties.65 d. The Uniform Commercial Code In addition to the state law discussed above, it is helpful to note that the Uniform Commercial Code (U.C.C.)
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