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DEPARTMENTS


allows the contractor to collect payment for its work even if the contractor left minor or trivial devia- tions from the contract requirements. Tis principle is well established in


California law, even being the subject of a standard jury instruction. Terefore, we argue that, just as an owner must pay a contractor for its substantial, if imperfect, performance, an owner should be prohibited from assessing liquidated damages and withholding payment from a contractor that has substantially completed its work. Alas, despite our arguments for


analogous application, “substantial performance” and “substantial completion” remain separate legal doctrines. “Substantial performance” focuses on the quantum of work, what the contractor did and how much. “Substantial completion” focuses on timing, when the contractor finished its work. For example, the deadline or statute of limitations for someone to file suit on a contractor’s latent construction defect is based upon the contractor’s substantial completion date, not whether the contractor ever substantially performed all of its contractual obligations.


Double Edged Sword Attorneys for contractors


sometimes argue that a court should find a particular liquidated damage provision to be unenforceable, because its collection would constitute a penalty and not an approximation of actual damages that were difficult to ascertain at the time that the contract was formed. Such an argument can be a “double-edged sword,” however, because the absence of a valid liqui- dated damage clause might entitle the owner to recover its general and special damages. Depending upon the circumstances, the owner’s general and specific damages might exceed liqui- dated damages, and some contractors have been stung with large actual damages that owners incurred. In addition to delay after the


contractor’s substantial completion of the project work, other facts can preclude the owner from obtaining


www.AGC-CA.org Associated General Contractors of California 15


liquidated damages from the contractor. Sometimes, the owner was the sole cause of construction project delay. Other times, the owner contributed to such delay. Either way, the owner’s own delay, in whole or in part, can stop that owner from collecting liquidated damages. In conclusion, all is not lost for


the contractor when the owner writes a proper clause, and later asserts and


LEGAL ISSUES


withholds liquidated damages. To fully evaluate the owner’s legal entitlement, if any, one must still analyze who caused the delays, when, and why. 


Ronald B. Pierce is president of RB PIERCE, A Professional Law Corpo- ration, 949.244.9367, rbpierceaplc@ gmail.com, www.rbpierceaplc.com, and general counsel to Griffith Company.


1-866-365-2287


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