Recently while catching up with an old friend over a cup of coffee, they sought my advice on a problem their grandmother was having with a construction contractor.
Their grandmother had hired the contractor to redo her kitchen, and halfway through the job, the guy and his team disappeared for days with no communication. What happened is that the contractor had gotten another client who wanted repairs done at their restaurant quickly, and they had been offered more money to start the job immediately.
So, they decided to leave my friend’s grandma’s job to focus on that, then come back to complete her work later.
The first thing I asked them after listening to this crazy story was whether they had signed a construction contract, and their response was yes.
A construction contract is a legally binding document between a contractor and their client that specifies, among other things, the construction work to be done, the payment terms, the quality of materials to be used and time the project will take complete.
I proceeded to explain to them that if the contract had been drafted by an experienced construction attorney, it was highly likely that there had been a builder breach of contract, and their grandma could take legal action against the contractor.
When Does a Breach of Construction Contract Happen?
When you enter into a verbal or written contract, you and all parties involved must honor the terms of the agreement.
If one or all parties in a contract fail to perform what is expected of them for no justifiable reason, a breach of contract has occurred.
In a construction contract, a breach may occur due to several reasons including;
- The contractor fails to complete the job described in the contract on time or at all
- The contractor uses more substandard materials than what was promised in the contract
- The contractor deviates from the project plan agreed upon in the contract
- The client fails to pay the contractor on time
- The client fires or replaces the contractor without warning or justifiable cause
What Are the Possible Remedies for a Breach of Construction Contract?
If a party in a construction contract alleges there has been a breach, there are several ways the parties involved can resolve the matter.
Negotiate and Settle
You and the contractor could hold a discussion and try to resolve the matter between yourselves.
For example, if the breach occurred because the contractor used substandard materials, you could raise this issue with them, and after having a discussion you could agree that they redo the job with the quality of material agreed upon in the contract.
If you can’t resolve the breach of contract between yourselves, you could try official channels such as mediation.
This will involve working with a mediator, who is a neutral third party, to find a solution to the breach of contract that is agreeable to all parties involved.
A mediator cannot take sides or impose a solution to your dispute. The individual, preferably a retired judge or experienced attorney, has one role only – to guide discussions between the warring parties so they can resolve the matter amicably and quickly.
If the above two methods fail, the next course of action is going to court.
This means the person alleging a breach of contract can proceed to file a lawsuit against the person who breached the contract.
In court, the person who files the lawsuit has to prove that a breach of contract did occur.
If they’re successful, the court may award them damages, which is monetary compensation for financial losses incurred due to the contract breach.
How Are Damages in Breach of Construction Contract Awarded?
Damages you could be awarded in a breach of construction contract case include:
This is the most common type of damages given in a breach of contract case.
Here the person who successfully filed the breach of contract lawsuit is awarded financial compensation for losses incurred due to the breach.
There are two types of compensatory damages:
- Expectation damages. When you hire a construction contractor, you’ll agree on the amount you’ll pay them to perform the job. The amount will be included in the contract, and this is what they’ll expect to earn after completing the task.
If you breach the contract and they sue you, they can be awarded the amount you agreed on for the job as expectation damages.
- Consequential damages. When a breach of the construction contract occurs, the injured party may incur some unexpected losses.
For example, if a building contractor was remodeling a hotel, the hotel may have to stay closed longer if they breach the agreement signed, which can lead to a loss of revenue. The profits lost can be awarded as consequential damages.
To give you an example of compensatory damages, if you hired a building contractor to renovate your home for $4,000 but they didn’t complete the job, and you had to hire another contractor who asked for $7,000, the first contractor can be asked to pay you $3000, which is the extra cost you had to pay to get the job done.
Also, if you’re the breaching party, in which case you hired the contract for $4,000 but changed your mind after signing the contract and didn’t use their services or pay them, they can sue you for breach of contract, and you could be asked to pay the $4,000 fee you agreed on.
Provision for these damages is usually included in the agreement signed between a client and construction contractor.
The provision states the amount of money that will be paid if a certain breach of contract occurs.
For example, during the construction contract negotiations, you could agree that if a contractor doesn’t complete the work assigned within the specified time, they must pay you $500 for each extra day they take to complete the work.
So, if they complete the project after 15 days instead of the 10 that you had agreed on, they’ll be liable to pay you $2500 ($500 x 5).
The penalty for delayed completion of work needs to be reasonable because a judge is unlikely to award liquidated damages that are excessive.
If you suffer no or little losses due to a breach of contract, a court may award you nominal damages, often a small amount of money, just to hold the breaching party accountable.
Other damages you may be entitled to should you experience a breach of construction contract, include punitive damages, restitution, and general damages.
The best way to know what damages you’re entitled to is by speaking to an experienced contract attorney.
Gallagher Krich, APC: Your Contract Attorneys
Should you find yourself in a situation where a breach of contract has happened, contact Gallagher Krich, APC. Our attorneys have successfully handled hundreds of breach of construction contract cases and our expertise can help you amicably resolve your contract dispute or get you the damages you deserve from the breaching party.
Contact us online now or give us a call at (858) 926-5797 for a free consultation on your legal options under California state laws for a breach of construction contract.