The Importance of Determining the Amount to Which You May Be Entitled After the Breach of a Construction Contract
Litigation is expensive. Before pursuing any particular claim, you need to determine if pursuing the claim makes economic sense. Standing on principle sounds good initially but often starts to seem like less of a good idea as the litigation costs mount.
The value of a claim is referred to as the “measure of damages.” In every lawsuit, the plaintiff has to prove that the defendant did something wrong that injured the plaintiff, i.e. establish the defendant’s “liability”; and the plaintiff has to prove the amount of money to which it is entitled to receive as a result of the defendant’s wrongful conduct to a reasonable certainty, i.e. establish the plaintiff’s “damages.”
Proving damages is just as important as proving liability. The failure of a plaintiff to prove its damages will result in the claims against the defendant being dismissed. See e.g. Shoreline Care Ltd. P’Ship v. Jansen & Rogan Consulting Eng’rs, P.C., 2002 Conn. Super. LEXIS 3715, *15, (Conn. Super. Ct. Nov. 15, 2002). In Shoreline Care Ltd. P’Ship, the project was constructed in phases but, because of the procedural history of the case, the general contractor was only potentially liable to the owner for damages arising from Phase I. Id. The owner conceded “that it has not specifically broken down damages claimed between Phases I and II; instead, it seeks a proportional breakdown of damages.” Id. However, by simply seeking a proportional breakdown, the court found that the owner “failed to prove its damages arising from construction deficiencies with respect to Phase I of the project.” Id. As a result, the complaint against the contractor was dismissed. Id.
The determination of damages arising from the breach of a construction contract requires the consideration of certain general contract principles as well as the specific details of the claim being asserted as follows:
- “The general rule in breach of contract cases is that the award of damages is designed to place the injured party, so far as can be done by money, in the same position as that which he would have been in had the contract been performed.” West Haven Sound Dev. Corp. v. West Haven, 201 Conn. 305, 319 (Conn. 1986).
- “Unless they are too speculative and remote, prospective profits are allowable as an element of damage whenever their loss arises directly from and as a natural consequence of the breach.” Kay Petroleum Corp. v. Piergrossi, 137 Conn. 620, 624 (Conn. 1951).
- “For a breach of a construction contract involving defective or unfinished construction, damages are measured by computing either (i) the reasonable cost of construction and completion in accordance with the contract . . . or (ii) the difference between the value that the product contracted for would have had and the value of the performance that has been received by the plaintiff, if construction and completion in accordance with the contract would involve unreasonable economic waste.” Hees v. Burke Constr.,, 290 Conn. 1, 19-20 (Conn. 2009).
- “A different method [of assessing damages] . . . is required to accomplish the ends of justice where the shortcomings are such as may be remedied and completion according to the contract had without substantial interference with the structure of the building, than where the remedy and completion involves substantial structural changes. . . . In the latter case, the amount of . . . [damages] might be measured by the diminished value of the building to the owner by reason of the defects.” Levesque v. D & M Builders, Inc., 170 Conn. 177, 181-182 (Conn. 1976).
- “In a foreclosure of a mechanic’s lien, a contractor is entitled to the value of the materials that it furnished or the services that it rendered in the construction of a project.” Absolute Plumbing & Heating, LLC v. Edelman, 146 Conn. App. 383, 396-397 (Conn. App. Ct. 2013).
- “[T]he well-established rule, in this and other jurisdictions, is that the reasonable value for which recovery may be had in cases of substantial performance of building contracts, is to be ascertained with reference to the contract price and by deducting from that price such sum as ought to be allowed for the omissions and variations.” Intercity Dev., LLC v. Andrade, 96 Conn. App. 608, 613 (Conn. App. Ct. 2006).
- “The allowance of interest as an element of damages is primarily an equitable determination and a matter within the discretion of the trial court.” Wilson v. Kapetan, Inc., 25 Conn. App. 529, 535, (Conn. App. Ct. 1991).
The final consideration in determining the amount of damages is the plaintiff’s duty to mitigate. “The duty to mitigate … [requires the plaintiff] to make reasonable efforts to minimize damages.” Danpar Associates v. Somersville Mills Sales Room, Inc., 182 Conn. 444, 446 (Conn. 1980). Generally, it is the defendant’s obligation to prove that the plaintiff did not mitigate its damages but that is not always the case. For example, consequential damages, i.e., the damages that do not arise as a natural consequence of the breach and include lost profits or other lost opportunities require the plaintiff to prove that it minimized such costs. See Nello L. Teer Co. v. Hollywood Golf Estates, Inc., 324 F.2d 669, 672 (5th Cir. Fla. 1963).
Thus, before pursuing any legal action, you should seek the advice of an experienced practitioner. If you need assistance determining whether any particular claim makes economic sense, please give me a call