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Despite the fact there is a set project schedule, we often find that construction projects are delayed and finish later than expected. As a result, Owners will often attempt to assess their liquidated damages against their Contractors for the delay at the end of the project. In doing so, Contractors typically claim that the delay was either Owner-Caused or a Concurrent Delay, which means the delay occurred due to acts of others beyond their control by multiple, independent parties.
The Concurrent Delay Challenge
Recent court decisions appear to be eroding the defense of the Concurrent Delay challenge. As a result, Owners are recovering damages from the Contractor for delays, and the Owner is being excused.
When a Surety receives notice of a claim involving delays caused by its Principal, liquidated damages are often the first mentioned. Liquidated damages are easily quantifiable as one of a Surety’s potential loss exposures. The application of liquidated damages against the Surety is frequently incorporated in the terms and conditions of the underlying contract. Thus, liquidated damages are widely recognized as chargeable against Sureties.
The Federal Miller Act
An even more onerous condition than the incorporation of the underlying contract is the Federal Miller Act, 40 U.S.C. Sections 3131 to 3134. Regulation confirms that liquidated damages are chargeable against a Surety upon the default of its Principal unless the Government agrees to the contrary.
State court decisions are split regarding the magnitude of liability assessed on Sureties for liquidated damages. Therefore, depending on the jurisdiction, it would not be unusual for state courts to seemingly render differing decisions.
It is always important to know how the courts rule on claims or defenses; these court rulings may set case precedent, which can be binding on future cases.
If you have questions regarding if an Owner can claim a Liquidated Damage against you for a project delay, it is best to speak with your Surety Broker. If you are starting work and need a Surety Bond, reach out to TSIB today! You may also click below to download our Small Contract Bond Program application.