Remedies for Breach of Contract in Construction Law
In contract law, a breach takes place whenever one of the parties to a contract fails in fulfilling its obligation or obligations as described in the contract. A breach is said to have taken place whether this failure took place partially or wholly. The breaching party might also have communicated an intent to fail the obligation or simply appeared not to be able to perform its obligation under the contract.
Construction contracts can be breached in several ways by either party to the contract. The most common breaches of contract stem from a contractor’s failure to perform a specific duty or a general contractor’s failure to pay. In the latter example, disputes over payment often arise as a result of deviation. Deviations occur when the manner of construction in the contract changes and those changes incur additional costs that are not recognized by the general contractor or another payer.
Regardless of the issues causing an alleged breach of contract to occur, the remedies for breach of contract in Florida construction law are the same as in the ordinary law.
These include damages, repudiation, rescission, and specific performance.
In common law, damages are a monetary award paid to a plaintiff in a civil case to make them whole after an injury or loss. To receive this award, the plaintiff must show that the breach of contract has caused foreseeable loss. To be recognized in a court, the loss must involve damage to property, mental or emotional injury or physical injury. Economic impact itself is rarely considered in the calculation of damages in construction cases but there are exceptions.
In addition to compensatory damages, damages may instead be nominal, contemptuous or exemplary
Nominal damages occur when a court determines that there are no calculable damages that resulted from the breach of contract. Therefore, because there is no amount to compensate the awarded party will receive an amount decided by the judge. While nominal damages are not by necessity “small” amounts of money, they usually are much less than the awards given to parties who were able to prove injury or loss.
When damages are awarded to a party, and the judge wants to make a point that the case itself should never have been brought to court, then the judge may award an obviously small amount of contemptuous damages. Contemptuous damages are so small as to do nothing more than make a statement of disapproval. For example, if a plaintiff brings a case to court that the judge believes should have been settled outside of the court system, that judge may award the plaintiff with $0.99. That would be a statement by the judge and constitute contemptuous damages.
Exemplary damages are awarded in whole or in part as a warning to third parties. Exemplary damages tend to be larger than all other types of damages as they are intended to be noticeably more than the loss or injury caused by the breach of contract. For example, if a contract breach would reasonably result in damages of $4,000, but the judge awards damages of $50,000, then these would be considered exemplary damages.
“…the remedies for breach of contract in Florida construction law are the same as in the ordinary law.”
Repudiation occurs when one party to a contract commits an anticipatory breach of contract (meaning that the contract is terminated by one party before the service is delivered). This can take several forms, including express repudiation, impossible terms and property transfers.
Express repudiation is when one party informs the other of an intention to not provide services or payment as per the terms of an executed agreement. Express repudiation occurs when the breaching party states clearly that they will not be making payment or performing the work that they agreed to. For example, if a plumbing contractor tells the General Contractor, “We will not affix the pipes in the bathroom as we promised we would in the agreement.”
When one party to a contract makes a decision or suffers a loss, they may not be able to honor the terms of a contract. This is also a type of repudiation. In construction contracts, this happens frequently when a general contractor runs out of funds and is forced to abandon a project before a subcontractor can finish their job. In this case, the contractor remains responsible on paper for honoring the terms of their contract. However, it is impossible to do so if the general contractor abandons the project. This is known as a repudiation based on impossible terms.
A repudiation can also happen when a property that is being constructed changes hands. If the property owner agrees to sell the property to a new owner, and the new owner does not want to continue the improvements being made on that property, they may repudiate the contract. This means that the general contractor and subcontractors would have to walk away from the unfinished construction – often unpaid.
Recission is a remedy to a breach of contract in which all parties return (as much as possible) to the status quo ante, the state in which they were before the contract was entered into. In extreme cases, this could be due to misrepresentation or duress, in which one party tricked or extorted the other to enter the contract. In most cases, however, it is brought about by a perceived breach of contract by one party that caused the other to seek rescission. Either way, when the rescission is complete the transaction is dissolved and the contract is no longer valid.
Courts may remedy a breach of contract with a requirement for the defendant to perform the duties in the contract or face a charge of contempt of court. The decision to apply a specific performance remedy is almost always the result of litigation. Specific performance usually applies in lieu of damages paid.
South Florida Law
Construction law is complex and full of areas that require the involvement of an experienced construction law attorney. If you are the owner of a property where improvements are being made, a general contractor or construction subcontractor it is essential that you have the legal representation to review and draft contracts and represent you in contract disputes.
Don’t attempt to go it alone in a breach of contract dispute – call South Florida Law today on (954) 900-8885 or reach out via our contact form.