Liquidated Damages Claims 34 by Jeremy P

CONSTRUCTION DELAYS Delay Provisions in the AIA and ConsensusDocs Form Contracts 4 By Jackson D. Glisson, III and Jessica Courtway Missouri Construction Delay Law: a 50 Year Review 12 By James R. Keller Construction Project Delays: An Expensive Gordian Knot 20 By Kenneth A. Slavens and Daniel Quackenbush Time Is Money, Unless Your Contract Says Otherwise; Documenting and Preserving Contractor Delay Claims, and Related Theories of Recovery 28 By Daniel A. Spirn and Alex McDonnell Construction Delay Damages – Liquidated Damages Claims 34 By Jeremy P. Brummond Vol. 66, No. 1 Summer 2019 VOL. 66 SUMMER 2019 NO. 1

President...... Sara G. Neill President-Elect...... Hon. Glenn Norton Vice President...... Hon. Carol Jackson ARTICLES Secretary...... Jamie Boyer Delay Provisions in the AIA and ConsensusDocs Form Contracts Treasurer...... Apollo Carey By Jackson D. Glisson, III and Jessica Courtway...... 4 Immediate Past President...... John G. Simon Public Policy Advisor...... Andrew Hartnett Missouri Construction Delay Law: a 50 Year Review Presidential Liaisons...... John Gunn By James R. Keller ...... 12 ...... Hon. Michael Mullen, Hon. Construction Project Delays: An Expensive Gordian Knot ...... Hon. Rodney Sippel By Kenneth A. Slavens and Daniel Quackenbush...... 20 ABA Delegates...... Hon. Jason M. Sengheiser ...... Lynn Ann Vogel Time Is Money, Unless Your Contract Says Otherwise; Documenting and Member-at-Large...... Christina Lewis Abate Preserving Contractor Delay Claims, and Related Theories of Recovery ...... Kristine H. Bridges By Daniel A. Spirn and Alex McDonnell...... 28 ...... Anne-Marie Brockland Construction Delay Damages – Liquidated Damages Claims ...... A.J. Bruning By Jeremy P. Brummond ...... 34 ...... Kerry Feld ...... Annette Heller ...... Jason Husgen FEATURES ...... Carolyn M. Husmann The President’s Page: ...... Andrea D. McNairy By Sara G. Neill...... 4 ...... Colleen Vetter Young Lawyers’ Division...... Shatrasha Stone History Young Lawyers Division Chair-Elect Baby Robbins, the Pastor and the Provost Marshal General ...... Rene Morency By Marshall D. Hier ...... 41 Criminal Law...... Ian Murphy Employee Benefits...... Stephen Evans Books in Brief...... 45 Family & Juvenile Law...... Zofia Sowers Labor & Employment Law...... Ronald Wiesenthal “The Art of Conflict” - Tales From The Courtroom Minorities in the Legal Profession ...... Craig Higgins By Michael A. Kahn and Alan C. Kohn (Bookbaby - 209 pages- $14.95). Patent, Trademark & Copyright Reviewed by Judge Arthur Litz ...... William Holtz Probate & Trust Law...... J. Rixey Ruffin The Brief Case Securities...... Caroline Paillou By Charles A. Weiss...... 46 Solo & Small Firm Practitioners...... Jeff Bunten Tax Wise Taxation...... Mark Milton “Weird Deductions” (and Some Lessons Learned) Trial...... Timothy McCurdy By Richard M. Wise, CPA, JD...... 51 Women in the Legal Profession...... Ruth Schneider Executive Director...... Zoe Linza The St. Louis Bar Journal (ISSN 05813344, USPS 002055) published quarterly for $12.00 per year for members, subscriptions for non-members not available, by The Bar Association of Metropolitan St. Louis (BAMSL), 555 Washington Avenue, Suite 100, St. Louis, MO 63101- 1249 (314-421-4134). Periodicals postage paid at St. Louis, Missouri, Postmaster: Send address changes to: Board of Editors The St. Louis Bar Journal c/o The Bar Association of Editor-in-Chief - John C. Rasp Metropolitan St. Louis, 555 Washington Avenue, Suite 100, St. Louis, MO 63101-1249. The opinions expressed Charles A. Weiss herein are those of the authors and are not necessarily in Marshall D. Hier Richard M. Wise conformity with those of the editor or with those of The Bar The Hon. Arthur Litz Association of Metropolitan St. Louis. Direct advertising Copyright © 2019 by The Bar Association of inquiries to Jennifer Mackie at (314) 421-4134. Acceptance Metropolitan St. Louis of advertising does not imply endorsement of products advertised or listed nor of statements concerning them.

THE ST. LOUIS BAR JOURNAL/ SUMMER 2019 1 Construction Delay Damages – Liquidated Damages Claims

By Jeremy P. Brummond

The damages an owner suffers a penalty unless two requirements when a project is delayed are differ- I. The general rule – are satisfied. First, the amount to ent than a contractor’s damages, and provisions designed to be paid in the liquidated damages thus, owner delay claims involve dis- penalize a contractor provision must be “a reasonable tinct issues. If a project is delayed, for delay are not forecast of just compensation for the 3 an owner can suffer many different enforceable. harm that is caused by the breach.” damages: loss of use, lost profits, ad- Second, the contemplated harm for ditional financing costs, loss of good- “Liquidated damages clauses are which the liquidated damages provi- will, and continued cost to monitor valid and enforceable; penalty claus- sion is meant to compensate must be and devote its resources to the proj- es are not.”1 To determine whether a “incapable or very difficult of accu- ect, among others. clause is a valid liquidated damages rate estimation.”4 Calculating these types of dam- clause or a penalty clause, Missouri Addressing these requirements in ages can be very difficult. For this follows the approach in the Restate- reverse order, there are relatively few reason, many construction contracts ment of Contracts and Restatement Missouri construction cases wherein include “liquidated damages” pro- (Second) of Contracts, both of which a contractor challenges a liquidated 2 visions intended to compensate a follow a similar approach. The Re- damages provision because, accord- project owner for its damages when statement recognizes that a liquidat- ing to the contractor, the owner’s de- 5 a project is delayed. Such “liqui- ed damages provision is generally lay damages were easily calculable. dated damages” clauses meant to compensate for project delay typi- cally require a contractor to pay a 1. Taos Constr. Co., Inc. v. Penzel Constr. Co., Inc., 750 S.W.2d 522, 525 (Mo. Ct. App. E.D. 1988) (citing Grand Bissell Towers, Inc. v. Joan Gagnon Enterprises, Inc., 657 S.W.2d 378, 379 per diem amount for every business (Mo. Ct. App. E.D. 1983). or calendar day that the project fails 2. Id. at 525–526. Taos relied on the Restatement of Contracts. More recent Missouri deci- to achieve either substantial or final sions involving attacks on liquidated damages provisions cite the Restatement (Second) completion (or both). Liquidated of Contracts. See Purcell Tire & Rubber Co., Inc. v. Executive Beechcraft, Inc., 59 S.W. 3d 505, damages clauses can be used for 510 (Mo. en banc 2001) (citing the Restatement (Second) of Contracts in reference to the approach taken by recent Court of Appeals decisions when addressing the validity of other purposes. For example, a con- liquidated damages provisions). struction contract can also stipulate 3. Corrigan Co. Mech. Contractors, Inc. v. Fleischer, 423 S.W.2d 209, 213–214 (Mo. Ct. App. to certain damages (or “liquidate” 1967) (quoting Restatement (First) of Contracts § 339 (1932)). damages) based on failure of a project to achieve performance criteria. 4. Id. at 214. A construction contract can also 5. But cf. City of St. Louis v. Parker-Washington Co., 196 S.W. 767, 771 (Mo. en banc 1917) (liqui- “liquidate” the damages payable to dated damages provision in pipe supply contract held to be unenforceable penalty when the contractor if there is a contract defendant contractor was able to easily track damages caused by delay of its supplier). termination. This article, however, Jeremy P. Brummond’s practice focuses on engineering and construction. Clients in- focuses only on liquidated damages clude property owners, engineers, general contractors, and specialty contractors and provisions meant to address project he represents clients in contract negotiation and drafting, claim resolution, and con- delay, including challenges to en- struction-related litigation including cases involving claimed construction and design forcing such provisions, and other defects, delay and lost productivity, and mechanic’s lien and payment bond claims. issues relating to liquidated damag- Jeremy is a member of the ABA’s Forum on the Construction Industry and a member es provisions meant to compensate of BAMSL’s Construction Law Committee. Jeremy was selected for inclusion in Mis- for project delay. souri & Kansas Rising Stars® 2010-2014 and in Missouri & Kansas Super Lawyers® for 2015-2018. He was recognized by The Best Lawyers in America® in 2019.

34 THE ST. LOUIS BAR JOURNAL/ SUMMER 2019 THE ST. LOUIS BAR JOURNAL/ SUMMER 2019 35 In most cases, by failing to advance determine if a liquidated damages 30, 1904, and thus, the owner had no the argument, it seems contractors provision provided for a “reasonable actual harm.15 The court agreed with agree calculating an owner’s damag- forecast” of harm – “not the dollar the contractor, stating “even though es like the loss of use of the space or amount of the subcontract.”11 the contract [can] be construed as pro- lost profits incurred because of delay viding for liquidated damages, where would be difficult (indeed, in many II. Missouri’s approach no damages whatsoever have been liquidated damages provisions there – some showing sustained by the breach, we do not is an express stipulation by the con- of actual harm is see how there could be a recovery of tractor that calculating the owner’s anything more than nominal damag- damages would be difficult). In- required to recover es.”16 Ward v. Haren quoted its earlier stead, most of the cases where liq- liquidated damages. decision in Werner v. Finley (which is uidated damages provisions in con- not a construction case) noting “[t]he Missouri follows a minority ap- struction contracts were challenged law undoubtedly is that, before any proach and not only requires an involve other attacks on the provi- liability to pay liquidated damages enforceable liquidated damages sions, including challenges relating can attach to the party in default, he provision for an owner to recover liq- to the requirement that the damages must have been guilty of a substan- uidated damages, but also requires be a reasonable forecast of just com- tial breach of his agreement, a breach some showing of actual harm or loss pensation for anticipated harm. which has resulted in more than mere by the owner before liquidated dam- In assessing whether liquidated nominal damage to the other party. ages can be awarded.12 damages are a reasonable forecast ‘This rule is so manifestly just that no of harm, “courts should consider In 1914, the St. Louis Court of Ap- discussion of it is necessary.’”17 peals discussed the requirement in the nature of the contract, the pub- The court of appeals has been care- Ward v. Haren.13 A contractor sued for lic detriment to be contemplated by ful to note the burden to show actual the balance due for a building meant the delay, and the difficulty in ap- harm or loss to trigger a right to re- for the Louisiana Purchase Exposi- proximating damages as a result of cover liquidated damages is not a 6 tion or “World’s Fair”, and the owner the delay.” The more difficult it is high burden. Indeed, the court of counterclaimed for liquidated dam- to prove damages with certainty, the appeals has seemed to suggest that ages when the building was not com- more likely the amount fixed will something short of a preponderance 7 pleted by April 15, 1904 as stipulated be deemed a “reasonable” forecast. of the evidence would be sufficient to in the contract.14 In reply, the contrac- “Although the Restatement speaks sustain the burden. In its opinion in tor argued liquidated damages should in terms of a ‘reasonable forecast of Taos Constr. Co., Inc. v. Penzel Constr. not be assessed because the building just compensation,’ actual damages Co., Inc.,18 while discussing and quot- was ready by April 26, 1904, in time are relevant to a determination of ing its prior opinion in Grand Bissell reasonableness.”8 for the intended occupancy on April

Contractors have argued the liqui- 6. Sides Constr. Co. v. City of Scott City, 581 S.W.2d 443, 446 (Mo. Ct. App. S.D. 1979). dated damages contemplated were not a “reasonable forecast” of just 7. See Restatement (Second) of Contracts § 356, cmt. b (1979) (cited with approval in Grand compensation for harm anticipated Bissell Towers, Inc., 657 S.W.2d at 379 n. 3). but instead were a penalty because 8. Taos, supra note 1 at 527 (citing Grand Bissell Towers, supra note 1 at 379); see also Ward v. the damages claimed were exces- Haren, 167 S.W. 1064, 1069 (Mo. Ct. App. 1914). sive compared to the compensation 9. Taos, supra note 1 at 525. to be paid to the contractor. In Taos 10. Id. at 523. Constr. Co., Inc. v. Penzel Constr. Co., 11. Id. at 527. Under the holding in Taos, owners can argue evidence of the overall con- Inc. a highway contractor passed tract value is irrelevant to the enforceability of a liquidated damages provision, if that on $9,200.00 in liquidated damages provision is designed to compensate an owner for project delay. But see Sides Constr. assessed against the highway con- Co., supra note 6 at 447 (noting the liquidated damages were minimal compared to the tractor to its seeding and fertilizing contract amount in finding the damages were not a penalty); but see also Arcese v. Dan- 9 iel Schmitt & Co., 504 S.W.3d 772, 783 (Mo. Ct. App. E.D. 2016) (overall contract value subcontractor. The subcontractor’s relevant when liquidated damages intended to compensate for breach of a contract to entire contract, however, was only purchase goods). 10 $13,900.00. On appeal, the sub- 12. See Corrigan Co. Mech. Contractors, Inc., supra note 3 at 214 (rejecting contractor’s claim contractor urged the court to take a for liquidated damages when no actual harm was incurred) (citing Ward v. Haren, supra “hindsight” approach and find the note 8 at 1070). liquidated damages clause provided 13. Supra note 8. for a penalty based on the relative 14. Id. at 1065–1066. value of the subcontractor’s contract. The court refused, holding the sub- 15. Id. at 1066. contractor was looking at the wrong 16. Id. at 1070. benchmark: the damages incurred or 17. Ward, supra note 8 at 1070 (quoting Werner v. Finley, 129 S.W. 75, 75 (1910)). anticipated should be evaluated to 18. Supra note 1.

36 THE ST. LOUIS BAR JOURNAL/ SUMMER 2019 Towers, Inc. v. Joan Gagnon Enterprises, rigan) could not impose liquidated actually finished and the line could Inc., the court of appeals stated: “al- damages when no actual harm to the not be used. Neither the intention though proof of actual loss is not a owner was shown.24 of the parties nor the construction of prerequisite to collecting liquidated Some authority exists, however, for the contract can depend upon what damages, a showing of some actual the proposition that a different ap- happened afterwards which was not harm or damage is necessary. ‘The proach should be applied in the pub- reasonably contemplated at the time showing of harm or damage neces- lic works context—an approach that of the execution of the contract.”28 sary to trigger the liquidated dam- does not require a public owner show In 1979, the Missouri Court of Ap- ages clause need not be a precise dol- any actual harm to recover liquidated peals (Southern District), in dicta, lar amount but simply a showing that damages. In Manufacturers Casualty implied the approach taken by the some harm or damage did in fact oc- Ins. Co. v. Sho-Me Power Corp., a con- Federal District court in Manufactu- cur. (Emphasis in original).’”19 tractor hired to construct a transmis- rers Cas. Ins. v. Sho-Me Power Corp. In Corrigan Co. Mech. Contractors, sion line for an electric utility compa- may have been the correct approach Inc. v. Fleischer, Corrigan brought a ny (a public corporation) brought an when addressing whether a public claim for money owed on a power action to recover its contract balance entity can recover liquidated damag- project, and Fleischer counterclaimed which was being withheld by the es.29 In Sides Constr. Co. v. Scott City, a for money owed on a different proj- utility to satisfy liquidated damages contractor brought an action against ect to convert three boilers for the because the project was completed the City to recover a balance with- St. Louis Housing Authority.20 Cor- late.25 The contractor argued it was held because the contractor failed to rigan denied any money was owed improper for the utility to claim liq- complete a swimming pool timely.30 Fleischer for the Housing Authority uidated damages because the utility The City produced ample evidence project because Fleischer was late on had no actual harm; other work by that it had been harmed, so the court that project which caused the Hous- the utility necessary for operation of appeals did not need to address ing Authority to assess liquidated of the line was not completed when whether a public owner must show damages against Corrigan.21 Ac- the contractor completed its work.26 actual harm to recover liquidated cording to the specifications for the The utility could not have used the damages. Notwithstanding, in its project, to prevent harm to the Hous- line earlier even if the contractor had opinion, it noted that it “doubt[ed]” ing Authority, two of the three boil- met the original completion date.27 “that any proof of actual damages ers were always to be in operation.22 Purporting to apply Missouri law, was necessary to bring the liquidat- Notwithstanding the project was de- the United States District Court for ed damages provision to life . . . .”31 layed, this part of the specification the Western District of Missouri ig- Almost ten years later, the Missouri was met, meaning two boilers con- nored the utility’s apparent failure Court of Appeals (Eastern District) in tinued to operate and no residents to show actual harm, stating: “Plain- Taos Constr. Co., Inc. v. Penzel Constr. suffered loss of heat or hot water.23 tiff can hardly maintain its position Co., Inc. cited the discussion from Si- The court of appeals rejected the liq- that no damage should be allowed des Constr. Co. v. Scott City with ap- uidated damages claim holding the in this case because other work was proval, noting the Southern District’s Housing Authority (and in turn, Cor- not completed when this line was “view” in Sides Constr. Co. that for a public works contract, “the public entity may recover liquidated damages solely upon proof of a violation 19. Supra note 1 at 526 (quoting Grand Bissell Towers, supra note 1 at 379 n. 3.). of the contract.”32 20. Supra note 3 at 210. III. Liquidated damages 21. Id. when the contractor 22. Id. at 213. is not the cause of 23. Id. the delay. 24. Id. at 214–15. Some Missouri cases addressing an 25. 157 F. Supp. 681, 682 (W.D. Mo. 1957). owner’s right to liquidated damages 26. Id. at 683. focus on whether the owner has suffered actual harm, but instead focus 27. Id. at 684. on whether the contractor can be li- 28. Id. at 684. able for liquidated damages when it is not the cause of the delay or when 29. Sides Constr. Co., supra note 6 at 443. the delay is caused by extra work. 30. Id. In some of these cases, contractors 31. Id. at 447. have been able to avoid liability for liquidated damages by showing the 32. Taos Constr. Co., Inc., supra note 1 at 526.

THE ST. LOUIS BAR JOURNAL/ SUMMER 2019 37 delays were excused under the terms court’s ruling, but as to the 15 days of damages—even though no timely of the parties’ agreement or as a mat- delay where the contractor claimed it request for more time was submit- ter of law.33 was caused by the architect’s failure ted—when there was evidence the In Ark Constr. Co. v. City of Floris- to promptly inspect the building, the owner (a school district) indicated in sant, a sidewalk contractor brought court reversed, finding the contractor conversations that it would be waiv- suit against Florissant to recover a was not excused for that delay (and ing liquidated damages.45 balance owed, and Florissant coun- was liable for liquidated damages for terclaimed for liquidated damages those 15 days).41 The parties’ con- IV. Liquidated damages because the contractor did not fin- tract included provisions mandating when the owner fails ish its work timely (by December 7, that written requests for more time to provide notice of a 34 be submitted if the contractor was 1973) as required by the contract. liquidated damages At trial, the contractor presented delayed for reasons beyond its con- testimony that the city engineer or- trol, including by acts or neglect of claim. the architect.42 According to the Mis- dered changes to the work orally Another issue that sometimes 35 souri Court of Appeals, compliance that delayed the project. A jury arises in construction cases where with that provision was required for found for the contractor and Floris- owners claim liquidated damages the contractor to successfully argue sant appealed. The Missouri Court is whether the owner has provided entitlement to extra time.43 of Appeals affirmed the trial court’s sufficient notice to preserve the liq- refusal to enter a directed verdict in In Southwest Eng’g Co. v. Reorga- uidated damages claim pursuant to Florissant’s favor on its liquidated nized Sch. Distr. R-9, the court of ap- the claim provisions in the contract. damages claim, stating “[a]lthough peals was careful to distinguish the Many construction contracts have plaintiff failed to complete the work facts of that case from other cases detailed claim provisions that re- by December 7, plaintiff is not to be where there was evidence the par- quire an owner or contractor to pro- held liable for any damages for any ties waived any requirement that vide timely notice of any assertion delay caused by the conduct of the requests for additional time be made that they are entitled to money or defendant’s representative in chang- in writing, and from those cases other relief under the contract, which ing the plans. When an owner hin- where the owner was unjustly with- may create a requirement to provide ders the performance of a building holding a “major part of the contract notice of a liquidated damages claim contract within a specified time, the price as liquidated damages, even depending on the language in the delay is ordinarily excused and the though [the owner] [sic] caused the agreement. contractor cannot be liable for liqui- delay.”44 Indeed, the Missouri Court The standard AIA general condi- dated damages.”36 of Appeals recently held that a con- tions (AIA A201), as an example, tractor was not liable for liquidated The contractor in Ark Construction contain provisions requiring notice was absolved of liability for liquidated damages even though it ap- parently did not submit a written re- 33. See, e.g., Massman Constr. Co. v. Kansas City, 487 S.W.2d 470, 478 (Mo. 1972) (trial court quest for additional time to perform found that city waived liquidated damages claim by ordering extra work after completion deadline, which finding was not challenged on appeal); Hart & Son Hauling, Inc. past the December 7 date (as man- v. MacHaffie, 706 S.W.2d 586, 589 (Mo. Ct. App. E.D. 1986) (trial court properly denied 37 dated by the contract). This result liquidated damages when owner’s conduct prevented performance). is in stark contrast to other Missouri cases where liquidated damages 34. 558 S.W.2d 418, 421 (Mo. Ct. App. 1977). awards have been allowed—even 35. Id. at 420. for that portion of the delay caused 36. Id. at 423. by the owner or architect—when the contractor fails to timely request an 37. See id. at 420 (the opinion references one written request for time up to December 7, extension of time under the terms of 1973, which was granted, but discusses no other requests for additional time). the parties’ contract.38 In Southwest 38. See, e.g., Bloomfield Reorganized Sch. Distr. No. R-14 v. E.M. Stites, 336 S.W.2d 95, 100 (Mo. Eng’g Co. v. Reorganized Sch. Distr. 1960); Southwest Eng’g Co. v. Reorganized Sch. Distr. R-9, 434 S.W.2d 743, 745 (Mo. Ct. R-9, a contractor on a school build- App. 1968). ing project brought suit to recover 39. 434 S.W.2d at 745–746. liquidated damages withheld by 40. Id. at 746. the school district.39 The trial court found the school district was entitled 41. Id. at 751. to liquidated damages for nine (9) 42. Id. at 750–51. days of delay, substantially less than 43. Id. the district was claiming, and the district appealed.40 The Missouri Court 44. Id. at 751. of Appeals affirmed most of the trial 45. Textor Constr., Inc. v. Forsyth R-III Sch. Distr., 60 S.W.3d 692, 699 (Mo. Ct. App. S.D. 2001).

38 THE ST. LOUIS BAR JOURNAL/ SUMMER 2019 of claims be provided within twen- March 9, 1993.51 According to the procedure was intended to cover ty-one (21) days of the events giv- court, the hospital was thus barred only changes or additions to the par- ing rise to the claim or whenever the under the terms of the contract from ties’ contractual relationship.57 But condition giving rise to the claim is recovering liquidated damages be- the Tennessee Court of Appeals re- discovered (whichever is later). At cause it waited six months after the jected that conclusion and reversed. least two courts outside Missouri in- “claim” arose to provide written no- It found that, according to the defi- terpreting the pre-2017 AIA language tice to the contractor.52 nition of “Claim” in AIA Document ruled that the failure to provide Similarly, in RCR Bldg. Corp. v. A201-1997, any deduction or request timely notice of a liquidated dam- Pinnacle Hosp. Partners,53 a contrac- for liquidated damages is a “Claim” ages claim barred the owner from tor did not substantially complete because it is a “demand . . . by one recovering.46 In, A. Hedenberg and a Hampton Inn & Suites hotel un- of the parties seeking, as a matter of Co., Inc. v. St. Luke’s Hosp. of Duluth,47 til October 30, 2008, which was 158 right . . . payment of money [or] ad- it was undisputed the contractor for days after the scheduled deadline of justment of the Contract Sum ... or the construction of an addition to a May 24, 2008.54 The owner waited other relief with respect to the terms hospital did not complete the proj- until March 29, 2009 to provide writ- of the Contract.”58 The court ruled ect timely.48 The project’s scheduled ten notice that the contractor owed the owner’s claim to liquidated dam- completion date was March 8, 1993, $237,000 in liquidated damages for ages was barred because the owner and the contractor did not substan- failing to complete the project on waited “nearly a year after the May tially complete the project until Au- time.55 The parties’ contract incorpo- 2008 substantial completion dead- gust 27, 1993.49 The owner, however, rated by reference the AIA Document line” to provide written notice.59 waited until September 7, 1993, after A201-1997, which has a twenty-one having received the contractor’s final (21) day written notice of claim re- V. Liquidated damages after payment request, to provide written quirement.56 The lower court ruled contractor termination. notice that it would be withholding that the collection of liquidated dam- 50 A relatively unsettled question of $90,000 as liquidated damages. ages was not a “claim” within the Missouri construction law involves The court held the hospital’s claim meaning of the contract because, an owner’s right to liquidated dam- for liquidated damages arose the it reasoned, liquidated damages ages after a contract termination. It moment the scheduled completion should be automatic and the claims is common for an owner to consider deadline was not met, which was on terminating a contractor when a project is significantly delayed. Termina- 46. In 2017, aware of these rulings, the AIA revised the standard AIA A201 to exclude a liq- tion, however, may result in eliminat- uidated damages claim from the categories of claims requiring prompt written notice. ing (or limiting) the claim against the AIA Document A201–2017, § 15.1.1 (2017). contractor for liquidated damages. 47. 1996 WL 146732, at *1 (Minn. Ct. App. Apr. 2, 1996). In 1983, the Missouri Court of Ap- 48. Id. peals addressed this issue in Twin River Constr. Co. v. Public Water Distr. 49. Id. at *1. No. 6.60 Twin River involved a dis- 50. Id. pute between a water district and 51. Id. at *2. contractor relating to a contract to install extensions to an existing wa- 52. Id. at *3. ter main system.61 Many disputes 53. 2012 WL 5830587, at *1(Tenn. Ct. App. Nov. 15, 2012). arose among the parties, culminating in a dispute about the punch list in 54. Id. October of 1976.62 When the contrac- 55. Id. at *1. tor refused to perform the punch list 56. Id. items, the district terminated the parties’ contract on October 28, 1976.63 57. Id. at *4. The trial court allowed the district 58. Id. at *9. a setoff of $18,450.00 in liquidated damages, which included liquidated 59. Id. at *12. damages from the required comple- 60. 653 S.W.2d 682 (Mo. Ct. App. E.D. 1983). tion date (February 28, 1976) to the 61. Id. at 684. date the engineer certified the project as complete (March 4, 1977).64 On 62. Id. at 688. appeal, the contractor argued it was 63. Id. improper to award any liquidated damages after the contract was ter- 64. Id. at 689. minated on October 28, 1976.65 The 65. Id. at 693.

THE ST. LOUIS BAR JOURNAL/ SUMMER 2019 39 court of appeals noted a split in au- ed as compensation for the same thority, but ultimately agreed with injury.”72 Notwithstanding this gen- VII. Conclusion the contractor.66 The court relied on eral rule, actual damages and liqui- Liquidated damages for construc- the Missouri Supreme Court’s 1909 dated damages can be awarded in tion delay are complex. A careful decision in Moore v. Board of Regents the same case and this often occurs. examination of the law, the construc- for Normal Sch. in Dist. No. 267 — Liquidated damages for delay are in- tion contract, the cause of the delay, which limited the liquidated dam- tended to compensate an owner for the parties, the actual damages (if ages which could be recovered to the delay. It is possible for an owner to any) caused by the delay, the dif- time before the owner removes the recover actual damages arising from ficulty in proving actual damages, contractor from the project —stating acts other than delays (need to finish whether the contract was terminated it was not inclined to hold otherwise a project, need to fix defective work) and the costs involved in asserting “until a contrary rule is declared by and liquidated damages for delay in a delay claim are all required when our supreme court.”68 the same case. Twin River, discussed dealing with a liquidated damages above, is a good example where ac- In 2012, the United States Court of claim. Thoughtfulness and careful tual and liquidated damages were consideration are a must. Appeals for the Eighth Circuit ad- properly awarded. In that case, q q q dressed the same issue in Weitz Co., the trial court awarded liquidated 69 LLC v. MacKenzie House, LLC. The damages for project delay and also Eighth Circuit, however, reached a awarded the district its actual costs different conclusion. It held that if incurred in finishing the project after presented with the issue today, the it terminated the contractor.73 The Missouri Supreme Court would hold court of appeals affirmed that award differently than it did in Moore v. noting the parties’ contract could Board of Regents.70 According to the “fairly be read to authorize both Eighth Circuit “[i]f the Missouri Su- types of damages . . . .”74 preme Court were to address the issue today, it would allow liquidated damages for a reasonable time after 66. Id. at 693–694. abandonment by the contractor or 67. 115 S.W. 6, 12–13 (Mo. 1909). 71 termination by the owner.” 68. Twin River Constr. Co., supra note 60 at 694. VI. Liquidated damages 69. 665 F.3d 970, 976–77 (8th Cir. 2012). and actual damages. 70. Id. at 976. 71. Id. at 977. One final issue relating to liquidated damages warrants discussion. 72. Twin River Constr. Co., supra note 60 at 694. In Missouri, liquidated damages and 73. Id. actual damages “may not be award- 74. Id.

40 THE ST. LOUIS BAR JOURNAL/ SUMMER 2019