Liquidated damages for late completion of a construction project are generally enforceable if the daily amount set at the time of contract formation represents a reasonable estimation of the actual damages the owner will incur in the event of late completion. A Texas court recently addressed a situation in which the owner’s contractual calculation for liquidated damages appeared arbitrary.
The municipal project owner had stipulated a daily rate of $5,000 but offered no explanation of how that amount had been calculated. The owner relied solely on the contractual recitation that the contractor agreed the amount was a reasonable estimation of actual damages. Additionally, municipal officials repeatedly made public statements that the amount was a “penalty” that should “motivate” the contractor.
The second case in this issue involves the state residency of construction companies that are limited liability corporations. A federal appeals court ruled an LLC can establish state residency only if each individual member of the LLC is a resident of that state.
The third case considers the professional services exception to a state consumer fraud statute. An architect is exempt when providing traditional architectural services. There is no exception, however, if the architect engages in the marketing or promotion of real estate.
