Breach of Construction Contracts
Assistance from Our Los Angeles Business Litigation Lawyer
According to the Bureau of Labor Statistics, the construction sector is
primarily engaged in the construction of buildings or engineering of highways,
utility systems etc. Construction work covers a broad range of developments
including new work, additions to residential homes or commercial buildings,
alterations, redesigns and reconstructions, demolition sites, or maintenance
or repairs. Most construction companies have a general place of business;
however, the construction company often performs multiple projects at
different sites. The production responsibilities of the construction sector
are typically covered in contracts with the owners of construction projects
(prime contracts) or contracts with other construction establishments
In the construction industry, contractors rely heavily on construction
contracts to protect themselves legally from any potential losses. The
construction contract serves as an agreement between the two parties involved
in a construction project, and both parties to the contract are obligated
to perform their end of the contract. If one of the parties fails to perform
their end of the contract, or otherwise "breaches" the contract,
then the other party can sue them for damages. The damages are the sum
of money that compensates the financial losses suffered as a result of
the contract breach.
Contracts are legally enforceable agreements that are made between two
parties. Under a contract, each of the parties makes a promise to fulfill
a specific obligation or to pay a certain amount of money. If one of the
parties fails to do as they promised, and the other party has fulfilled
their end of the agreement, then the injured party has a right to pursue
In general, both oral and written contracts are legally enforceable; however,
it is always recommended to put a contract into writing in case a dispute
arises between the two parties down the line. If a contract is oral, then
the terms of the contract can be open to misinterpretation, or one of
the parties can forget a term of the original arrangement altogether.
A contract breach occurs when one of the parties fails to perform their
duties under the terms of the contract. A contract can be breached when
one of the following occurs: 1) one of the parties doesn't perform
their duties as promised, 2) one party does something that prohibits the
other party from performing their duties under the contract (e.g. one
party fails to complete laying a foundation or installing the electrical),
and 3) one of the parties refuses to perform their contract duties.
Computing Damages in a Construction Contract
Construction contracts are computed based on either cost-to-complete or
diminution-in-value. While both measures are perfectly valid, it will
be up to the court to determine which method is used. With cost-to-complete,
the losing party is required to pay damages to either replace or complete
the project based upon the original agreement. This method is typically
used when the breaching party has either provided poor quality workmanship
or when they have failed to complete the project.
Under the diminution-in-value method, the losing party is required to pay
the difference between the completed project and the project that was
originally outlined in the contract. Therefore, with a new home, the court
would calculate the market value of the finished home and the home that
was first specified in the initial contract, and the losing party would
have to pay the difference between the two. This method is typically used
when the losing party has already performed a significant amount of work
on the contract under current agreement.
Types of Damages in a Breach of Contract
There are different types of damages that may apply under a breach of a
construction contract. When one of the parties has breached the contract,
then the party that has held up to their end of the contract may be entitled
to various legal remedies. These may include consequential damages, liquidated
damages, nominal damages and damages for specific performance.
Consequential damages require the losing party to pay the other party enough
damages so they can be in the same position they would have been in if
the contract had been performed correctly. Punitive damages are meant
as punishment, whereas liquidated damages mean that the breaching party
would pay a specified sum in an amount that was included in the contract.
Finally, nominal damages refers to a minimal amount provided to the winning
party of the case, yet losing little.
Under California law, there is what is called a "statute of limitations"
that applies to filing lawsuits. What is a statute of limitations? It
is the deadline that a person has to file a lawsuit and if they miss the
filing deadline, they lose their legal right to file a lawsuit permanently.
The amount of time that someone has to file a claim varies depending upon
the type of lawsuit being filed; for breach of written contract claims
in California, one has four years from the date the contract was broken
to file a lawsuit.
If you entered into a construction contract and the other party has failed
to uphold their end of the agreement, then the sooner you take legal action
the better. At The Mirkhan Firm, our business lawyers are well aware the
construction industry is under a great deal of pressure and competition
at this point time due to the weakened economy; therefore, it's absolutely
imperative that your business remain afloat and your overhead be kept
as low as possible if you want to remain solvent. For this reason, we
take quick and decisive actions to help find the most affordable solution
to your breach of contract claim.
LET US HELP
There are cases where the court may not consider that a financial damage
award is appropriate, in which case the court may award an equitable remedy
instead of a monetary award. This remedy may require that the breaching
party performs their duties under the contract, or the court may nullify
the contract or otherwise void it; therefore, neither party would be required
to perform their obligations.
Contract law is complex and each state has enacted its own set of laws in
breach of contract claims. If you have encountered a dispute with another other party, or
if the other party has failed to perform their duties under the contract,
then you are encouraged to
contact a Los Angeles business litigation attorney from
The Mirkhan Law Firm right away. We will give you honest and forthright advice about your rights
and inform you of any legal remedies under California State laws.