{"id":901616,"date":"2023-09-14T09:58:33","date_gmt":"2023-09-14T15:58:33","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=901616"},"modified":"2023-09-15T10:02:27","modified_gmt":"2023-09-15T16:02:27","slug":"liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/","title":{"rendered":"Liquidated Damages Disproportionate to Actual Damages Deemed Unenforceable"},"content":{"rendered":"\n

John Mark Goodman | BuildSmart<\/a><\/p>\n\n\n\n

Construction contacts often include provisions that provide for pre-determined or \u201cliquidated\u201d damages<\/a> in the event of a breach. Such provisions can provide certainty to the parties as to the consequences of a breach and can simplify the task of proving up damages at trial. However, as one contractor found out recently, courts may refuse to enforce liquidated damages provisions if the amount specified is disproportionate to the actual damages (see\u00a0Smart Construction & Remodeling v. Suchy<\/em>, 2023 WL 5525071 (Minn. Ct. App. August 28, 2023)<\/a>).\u00a0<\/p>\n\n\n\n

Smart Construction<\/em> involved a contract to repair a home in exchange for insurance proceeds. In negotiating the cost of repairs with the insurance company, the contractor submitted an estimate showing that it would receive 10% overhead and 10% profit on the job. After the contractor had reached agreement with the insurance company, the owner elected to forego the repairs. The contractor sued the owner for breach. The contract provided that in the event of a breach by the owner, the contractor would be entitled to 30% of the contract value as liquidated damages. The jury found that the owner breached the contract and awarded the contractor 30% liquidated damages.<\/p>\n\n\n\n

The owner moved to set aside the jury\u2019s verdict claiming that liquidated damages of 30% were disproportionate to the contractor\u2019s actual damages, which were at most 20%. The trial court, and later the appellate court, agreed. Under Minnesota law, which is similar to the law in other states, courts refuse to enforce liquidated damages provisions that are punitive rather than compensatory. As the court explained:<\/p>\n\n\n\n

\n

The law adopts as its guiding principles that the injured party is entitled to receive a fair equivalent for the actual damages necessarily resulting from failure to perform the contract and no more. Punishment of a promisor for breach, without regard to the extent of the harm that he has caused, is an unjust and unnecessary remedy and a provision having an impact that is punitive rather than compensatory will not be enforced.<\/p>\n<\/blockquote>\n\n\n\n

\n

Id. at *6. Where the amount of actual damages is susceptible of definite measurement, liquidated damages that are \u201cgreatly disproportionate\u201d to actual damages are considered to be a penalty and therefore unenforceable.  <\/p>\n<\/blockquote>\n\n\n\n

Applying these principals, the court held that the contractor\u2019s actual damages were susceptible of definite measurement in that they were at most the 20% overhead and profit figure quoted to the insurance company. The court further held that liquidated damages of 30% \u2013 or 50% more than actual damages \u2013 was excessive and therefore unenforceable. The court reasoned that \u201c[n]o legitimate purpose is served by the inflated liquidated damages term\u201d and that the excessive amount of liquidated damages \u201cimproperly pressures the homeowner to remain in the contract, even if the homeowner does not want to proceed with repairs or disagrees with the repairs or materials as the work and materials are determined in the future.\u201d<\/p>\n\n\n\n

Interestingly, the contractor had only claimed liquidated damages \u2013 not actual damages. As such, the contractor was left with no remedy for the owner\u2019s breach when the liquidated damages provision was struck down. <\/p>\n\n\n\n

Smart Construction<\/em>\u00a0is a good reminder that the (1) liquidated damage provision should be crafted to approximate actual damages to the extent possible and (2) litigants should claim actual damages as a fallback in case liquidated damages fall through.<\/p>\n\n\n\n

\n\n\n\n

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

John Mark Goodman | BuildSmart Construction contacts often include provisions that provide for pre-determined or \u201cliquidated\u201d damages in the event of a breach. Such provisions can provide certainty to the parties as to the consequences of a breach and can simplify the task of proving up damages at trial. However, as one contractor found out… Continue reading Liquidated Damages Disproportionate to Actual Damages Deemed Unenforceable<\/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":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9],"tags":[9895,224,9112],"class_list":["post-901616","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-advise-consult","tag-construction-contract","tag-liquidated-damages","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nLiquidated Damages Disproportionate to Actual Damages Deemed Unenforceable - Advise & Consult, Inc.<\/title>\n<meta name=\"description\" content=\"Construction contacts often include provisions that provide for pre-determined or \u201cliquidated\u201d damages in the event of a breach\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Liquidated Damages Disproportionate to Actual Damages Deemed Unenforceable - Advise & Consult, Inc.\" \/>\n<meta property=\"og:description\" content=\"Construction contacts often include provisions that provide for pre-determined or \u201cliquidated\u201d damages in the event of a breach\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/\" \/>\n<meta property=\"og:site_name\" content=\"Advise & Consult, Inc.\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/\" \/>\n<meta property=\"article:published_time\" content=\"2023-09-14T15:58:33+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-09-15T16:02:27+00:00\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:site\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/\"},\"author\":{\"name\":\"admin\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7\"},\"headline\":\"Liquidated Damages Disproportionate to Actual Damages Deemed Unenforceable\",\"datePublished\":\"2023-09-14T15:58:33+00:00\",\"dateModified\":\"2023-09-15T16:02:27+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/\"},\"wordCount\":599,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\"},\"keywords\":[\"Advise & Consult\",\"Construction Contract\",\"Liquidated Damages\"],\"articleSection\":[\"Construction Contracts\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/\",\"name\":\"Liquidated Damages Disproportionate to Actual Damages Deemed Unenforceable - Advise & Consult, Inc.\",\"isPartOf\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#website\"},\"datePublished\":\"2023-09-14T15:58:33+00:00\",\"dateModified\":\"2023-09-15T16:02:27+00:00\",\"description\":\"Construction contacts often include provisions that provide for pre-determined or \u201cliquidated\u201d damages in the event of a breach\",\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/\"]}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#website\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/\",\"name\":\"Advise & Consult, Inc.\",\"description\":\"Construction Expert Witnesses\",\"publisher\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.myconstructionexpert.com\/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\",\"name\":\"Advise & Consult\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png\",\"contentUrl\":\"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png\",\"width\":162,\"height\":75,\"caption\":\"Advise & Consult\"},\"image\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/\",\"https:\/\/x.com\/adviseconsult\",\"https:\/\/www.linkedin.com\/company-beta\/204526\/\",\"https:\/\/www.youtube.com\/user\/MrConstructionExpert\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7\",\"name\":\"admin\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg\",\"caption\":\"admin\"},\"sameAs\":[\"http:\/\/www.expertwitnessinconstruction.com\"]}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Liquidated Damages Disproportionate to Actual Damages Deemed Unenforceable - Advise & Consult, Inc.","description":"Construction contacts often include provisions that provide for pre-determined or \u201cliquidated\u201d damages in the event of a breach","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/","og_locale":"en_US","og_type":"article","og_title":"Liquidated Damages Disproportionate to Actual Damages Deemed Unenforceable - Advise & Consult, Inc.","og_description":"Construction contacts often include provisions that provide for pre-determined or \u201cliquidated\u201d damages in the event of a breach","og_url":"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/","og_site_name":"Advise & Consult, Inc.","article_publisher":"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/","article_published_time":"2023-09-14T15:58:33+00:00","article_modified_time":"2023-09-15T16:02:27+00:00","author":"admin","twitter_card":"summary_large_image","twitter_creator":"@adviseconsult","twitter_site":"@adviseconsult","twitter_misc":{"Written by":"admin","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/#article","isPartOf":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/"},"author":{"name":"admin","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7"},"headline":"Liquidated Damages Disproportionate to Actual Damages Deemed Unenforceable","datePublished":"2023-09-14T15:58:33+00:00","dateModified":"2023-09-15T16:02:27+00:00","mainEntityOfPage":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/"},"wordCount":599,"commentCount":0,"publisher":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization"},"keywords":["Advise & Consult","Construction Contract","Liquidated Damages"],"articleSection":["Construction Contracts"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/","url":"https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/","name":"Liquidated Damages Disproportionate to Actual Damages Deemed Unenforceable - Advise & Consult, Inc.","isPartOf":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#website"},"datePublished":"2023-09-14T15:58:33+00:00","dateModified":"2023-09-15T16:02:27+00:00","description":"Construction contacts often include provisions that provide for pre-determined or \u201cliquidated\u201d damages in the event of a breach","inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.myconstructionexpert.com\/blog\/liquidated-damages-disproportionate-to-actual-damages-deemed-unenforceable\/"]}]},{"@type":"WebSite","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#website","url":"https:\/\/www.myconstructionexpert.com\/blog\/","name":"Advise & Consult, Inc.","description":"Construction Expert Witnesses","publisher":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.myconstructionexpert.com\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization","name":"Advise & Consult","url":"https:\/\/www.myconstructionexpert.com\/blog\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/","url":"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png","contentUrl":"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png","width":162,"height":75,"caption":"Advise & Consult"},"image":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/","https:\/\/x.com\/adviseconsult","https:\/\/www.linkedin.com\/company-beta\/204526\/","https:\/\/www.youtube.com\/user\/MrConstructionExpert"]},{"@type":"Person","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7","name":"admin","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg","caption":"admin"},"sameAs":["http:\/\/www.expertwitnessinconstruction.com"]}]}},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p2ztG6-3Myc","jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/901616","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/comments?post=901616"}],"version-history":[{"count":1,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/901616\/revisions"}],"predecessor-version":[{"id":901617,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/901616\/revisions\/901617"}],"wp:attachment":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/media?parent=901616"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/categories?post=901616"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/tags?post=901616"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}