Last week, Florida’s Second District Court of Appeal affirmed a $638,794.10 award for damages in favor of a utility contract, and reversed an award of $177,750 in liquidated damages in favor of the county that hired it. The damages awarded arose from an improper stoppage of work and delay in construction by the county.
Sarasota County Florida v. Southern Underground Industries, Inc. arose from a contract between the county and a utility contractor to install a force main pipe and water transmission line underneath the intracoastal waterway in Sarasota County. Part way through construction, a homeowner complained to the County that vibrations from the work were damaging his home. That same day, the County issued a stop work order under the contract to correct a safety issue. This stop work order was proper.
In response, the contractor hired a structural engineer to review cracking at the homeowner’s residence. The engineer determined that the vibrations were within permissible levels, that the contractor had appropriate detection procedures in place to prevent further damage, and that the damage caused to date was purely cosmetic. The contractor offered to repair the damage using a contractor of the homeowners’ choice, but the homeowner rejected this, instead asking the county for a warranty. The county did not provide a warranty, and the homeowner pursued a claim under the contractor’s insurance policy.
While this was ongoing, the suspension of the work continued, until the county lifted the stop work order on November 27, 2016. At that time, 93 days had passed from the date the homeowner first contacted the county, and 71 days had passed since the issuance of the engineer’s report declaring the damage cosmetic. Under the contract, the utility contractor asked for additional costs and time to complete the contract due to the county’s delay in restarting the work following the engineer’s report. The county rejected this request, and the contractor filed suit for breach of contract.
The trial court determined that the contractor incurred $638,794.10 in expenses due to the county’s wrongful continuation of the stop work order. The trial court also found that the county was entitled to liquidated damages of $250 per day for the delayed completion of the project, in the amount of $177,750.00. Both sides appealed these awards.
The county appealed the the $638,000 award to the contractor, arguing that a provision in the contract the prevented an award of damages for delays should have precluded the award. While the court recognized that this was the general rule, exceptions exist where a party acts in bad faith, with fraud, or with active interference in the performance of the contract. The court determined that the county’s prolonged stoppage of the work while it tried to work a resolution with the homeowner after the issuance of the engineer’s report was active interference, and supported the trial court’s award.
The contractor appealed the $177,750 award, arguing that because it was the county’s efforts with the homeowner that had delayed the project, and not the contractor, the county was not entitled to liquidated damages. The appellate court agreed with this argument as well, and recognized that the delays complained of by the county were related to the county’s efforts to appease the homeowner and were not caused by the contractor.
The key takeaway from this case is that rarely are the provisions of a contract the final deciding factor in determining who will prevail in a case. Here, the contract between the parties had language limiting delay damages and providing for liquidated damages. But because of the conduct of the parties, the courts involved found that delay damages were appropriate and liquidated damages were not. Always consult with counsel when you may have claims relating to delays in construction.