{"id":891610,"date":"2017-02-09T10:39:08","date_gmt":"2017-02-09T17:39:08","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=891610"},"modified":"2017-02-09T10:39:08","modified_gmt":"2017-02-09T17:39:08","slug":"federal-court-pennsylvania-analyzes-types-damage-barred-contractual-waiver-consequential-damages","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/federal-court-pennsylvania-analyzes-types-damage-barred-contractual-waiver-consequential-damages\/","title":{"rendered":"Federal Court in Pennsylvania Analyzes Which Types of Damage are Barred by Contractual Waiver of Consequential Damages"},"content":{"rendered":"

Kristopher Berr | Pepper Hamilton LLP<\/a> | January 26, 2017<\/p>\n

Jay Jala, LLC v. DDG Construction, Inc., No. 15-3948, 2016 US Dist. LEXIS 150969 (E.D. Pa. Nov. 1, 2016)<\/strong><\/em><\/p>\n

Jay Jala, LLC was the owner of a motel construction project in Allentown, Pennsylvania. DDG Construction, Inc. was the contractor.\u00a0 The project was delayed during construction and, four months after the specified completion date, DDG abandoned the project.\u00a0 Jay Jala terminated DDG for default, completed the project, and initiated this action.<\/p>\n

The contract provided that the parties \u201cwaive Claims against each other for consequential damages arising out of or relating to this Contract.\u201d During litigation, DDG stipulated that it breached the contract but moved for partial summary judgment, arguing that Jay Jala\u2019s damages were consequential, and thus waived.<\/span><\/p>\n

The question presented by DDG\u2019s motion was: \u201cwhat distinguishes available direct damages from the consequential damages waived by the contract?\u201d The Court reasoned that the distinction turns on whether the damages represent the loss of DDG\u2019s performance (direct damage), or the loss of something collateral (consequential damage).\u00a0 The Court then undertook to determine which of Jay Jala\u2019s damages \u201cwas a separate business arrangement that [Jay Jala] made\u201d and which damages represented something Jay Jala \u201chad to pay in an effort to replace the performance [DDG] failed to provide.\u201d<\/p>\n

Utilizing this distinction, the Court granted DDG\u2019s motion with respect to Jay Jala\u2019s damages for: pre-purchased insurance premiums for operation of the completed motel, costs for additional months of advertising the motel, and additional months of furniture, fixtures and equipment leasing expenses. The Court reasoned that under the contract, DDG was not required to cover any of these costs, and thus these losses were not incurred to replace any portion of DDG\u2019s performance.\u00a0 Instead, each related to a separate business arrangement made by Jay Jala, and was therefore covered by the waiver of consequential damages.<\/p>\n

But, the Court denied DDG\u2019s motion with respect to three of Jay Jala\u2019s claims. With respect to Jay Jala\u2019s \u201cproject completion fee,\u201d the Court understood that term to encompass Jay Jala\u2019s overhead during the period when it acted as its own contractor following DDG\u2019s breach.\u00a0 The Court reasoned that if Jay Jala had hired a replacement contractor, that contractor\u2019s fee, including overhead, would have been recoverable as direct damage.\u00a0 The fact that Jay Jala itself acted as completion contractor did not bar recovery.<\/p>\n

Next, the Court held that Jay Jala could recover utility costs it paid during the months following DDG\u2019s breach. The contract expressly required DDG to pay monthly utility costs until completion of the project.\u00a0 Therefore, utility costs were direct damages because Jay Jala\u2019s payment of those costs replaced a portion of DDG\u2019s expected contract performance.<\/p>\n

Finally, the Court held that Jay Jala could recover as direct damage the additional months of construction loan interest it paid following DDG\u2019s breach. The Court reasoned that because DDG agreed to construct the project within a specified period of time, it necessarily agreed that Jay Jala should incur only a specified amount of construction loan interest and, therefore, the additional interest was a direct damage.<\/p>\n

For ease of reference the Court\u2019s holding is represented in chart form below:<\/p>\n\n\n\n\n\n\n
Direct Damage<\/strong><\/td>\n\u00a0<\/strong><\/td>\nConsequential Damage<\/strong><\/td>\n<\/tr>\n
Project Completion Fee<\/td>\n<\/td>\nAdditional Months of Motel Insurance Premiums<\/td>\n<\/tr>\n
Utility Costs Contractor had Contractually Agreed to Pay<\/td>\n<\/td>\nAdditional Months of Advertising Costs<\/td>\n<\/tr>\n
Additional Months of Interest on Construction Loan<\/td>\n<\/td>\nAdditional Months of Furniture, Fixtures and Equipment Lease<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

To view the full text of the court\u2019s decision, courtesy of Lexis\u00ae<\/sup>, click here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Kristopher Berr | Pepper Hamilton LLP | January 26, 2017 Jay Jala, LLC v. DDG Construction, Inc., No. 15-3948, 2016 US Dist. LEXIS 150969 (E.D. Pa. Nov. 1, 2016) Jay Jala, LLC was the owner of a motel construction project in Allentown, Pennsylvania. DDG Construction, Inc. was the contractor.\u00a0 The project was delayed during construction… Continue reading Federal Court in Pennsylvania Analyzes Which Types of Damage are Barred by Contractual Waiver of Consequential Damages<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[164,9721],"tags":[9895,9099,9899,7754,56],"class_list":["post-891610","post","type-post","status-publish","format-standard","hentry","category-construction-dispute","category-property-damage","tag-advise-consult","tag-consequential-damages","tag-contractual-waiver-of-consequential-damages","tag-pennsylvania","tag-property-damage","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nFederal Court in Pennsylvania Analyzes Which Types of Damage are Barred by Contractual Waiver of Consequential Damages - 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