Liquidated damages for late completion are a contractually stipulated form of delay damages. And, recovery of duplicative damages is prohibited, as it provides a payment windfall in excess of actual damages. A prime contractor’s recovery from a defaulted subcontractor recently provided an interesting application of these principles.
The subcontract did not include a liquidated damages clause, but it did contain a “pass-through” provision—any liquidated damages assessed by the project owner against the prime contractor as a result of the subcontractor’s slow performance were the responsibility of the subcontractor. The subcontract also said the tardy sub would owe the contractor for “extended project overhead.”
The subcontractor argued that the liquidated damages pass-through and assessment for extended overhead amounted to double recovery. The contractor responded that the extended overhead constituted an element of delay damages distinct from the pass-through.
The second case in this issue involves the “cost of repair” measure of damages on a cost-plus contract. The defaulted contractor argued this was not a fixed-price contract where the owner received a defined project for a set price; rather, the owner was responsible for the cost of the work even if it was in need of repair.
The third case addresses the government’s sovereign act of closing access to a military base during the COVID-19 pandemic. While the contractor could not recover increased on-site costs from the government, questions arose about the increased costs of off-site work the contractor could have performed notwithstanding the closure.
