14.5 Proof of Damages

• Library: Virginia Construction Law Deskbook (Virginia CLE) (2019 Ed.)

14.5 PROOF OF DAMAGES

14.501 Standard of Proof. A plaintiff bears the burden to prove with reasonable certainty that the defendant caused the damages claimed. ¹³⁷

14.502 Actual Cost. In order to recover damages, a plaintiff must provide a reasonable estimate of costs from data ¹³⁸ found, for example, in accounting records, subcontracts, estimates, daily logs, job diaries, or industry manuals. ¹³⁹ Courts typically demand this level of supporting evidence because direct (general) damages arise "naturally" or "ordinarily" from a breach of contract and are therefore recoverable, even if the exact amount of damages is not ascertainable. ¹⁴⁰ Courts must look to this specific proof to determine the damage amount. Consequential (special) damages, on the other hand, arise from the intervention of special circumstances and are compensable only if the special circumstances were within the "contemplation" of both parties. ¹⁴¹

14.503 Cost Estimates.

A. In General. When a contractor cannot, through documents and other data alone, prove actual costs incurred by an owner's delay or disruption, the contractor should rely on an expert witness. ¹⁴² For instance, a prospectus budget prepared at the beginning of a project that includes an expected profit margin may not provide the court with sufficient evidence to determine a lost profit claim. ¹⁴³ However, estimates based on similar projects, usually furnished by experts, provide objective comparative data on similar projects. Such an analysis often gives the court sufficient proof to justify an award. ¹⁴⁴

[Page 586]

B. Jury Verdict Method. A trial court determines, as a matter of law, whether damages are direct or consequential. A jury, however, weighs the importance of special circumstances, such as the parties' contemplation regarding consequential damages, or determines actual damages when a contractor is unable to do so with adequate precision. ¹⁴⁵ The jury verdict method involves gathering all of the information available, with interpretations of this information from expert testimony and the parties, and submitting the information and interpretations to a jury. Courts typically rely on the jury verdict method when a plaintiff demonstrates that it has been injured and no other method, such as the total cost method, is sufficiently reliable to establish an award for recovery. ¹⁴⁶

C. Total Cost Method. The total cost method compares the contractor's actual costs with the original estimate in the agreement. Contractors often assert the total cost method for recovery simply by demonstrating that the defendant is responsible for the additional expenses incurred. Many courts disfavor the over-broad scope and unreliability of this approach. ¹⁴⁷ Some courts have allowed recovery under the total cost method if the plaintiff proves four factors:

1.	The nature of the loss makes it impossible or highly impracticable to calculate damages;
2.	The contractor's original bid was reasonable and reliable;
3.	The contractor's actual costs were reasonable; and
4.	The contractor is not responsible for the increased expense. 148

[Page 587]

The Virginia Supreme Court endorsed the "total cost" method in Pebble Building Co. v. G.J. Hopkins, Inc. ¹⁴⁹ In Pebble, the subcontractor received an award of the additional costs for labor over the original bid amount because the subcontractor provided sufficient evidence to permit "an intelligent and probable estimate thereof." ¹⁵⁰ The subcontractor based its original bid amount on averages found in industry manuals, and the court found that the industry manuals were reliable. Additionally, the defendant did not challenge the reasonableness of the original estimate, and there was no evidence that the subcontractor contributed to the delay. Accordingly, the court allowed the total cost method to be used for calculating damages. ¹⁵¹ The defendants could have tempered this outcome with proof that the subcontractor's original bid was unreasonable or that the plaintiff contributed to the increased costs or their associated delays. ¹⁵²

The court in Pebble rejected the defendant's defense that the evidence was insufficient and "nothing more than an educated guess." ¹⁵³ The court noted that it found "abundant evidence" to sustain an award of damages based on "relatively accurate and realistic predictions of the labor ultimately required on a properly supervised project." ¹⁵⁴ The court added that an "intelligent and probable estimate," as opposed to "absolute certainty," is necessary to...