5.6 Remedies for Performance Shortfalls and Failures

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

5.6 REMEDIES FOR PERFORMANCE SHORTFALLS AND FAILURES

5.601 In General. Violations of the USBC are considered per se negligent, exposing the violator to liability. ¹⁹⁸ In addition, a violation of the USBC is a misdemeanor, subjecting the violator to civil fines or even confinement in jail for repeated offenses. ¹⁹⁹

5.602 Breach of Contract.

A. Measure of Damages. In a breach of contract suit against a contractor, the general measure of damages is the cost to complete the contract according to its terms or to repair what has been done so that the contract terms are met. ²⁰⁰ Recovery is based upon the market price of completing or correcting the performance, generally ascertained by the price of an appropriate substitute contractor. ²⁰¹ However, this measure will not be used if the cost to complete would involve "unreasonable economic waste." ²⁰² When the defect is not remediable "from a practical standpoint," the measure of damages is the difference between the value of the defective structure and the value of the structure had it been properly constructed. ²⁰³

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B. Liquidated Damages for Late Performance or Non-Performance. The Virginia Supreme Court has observed that liquidated damages provisions are "commonly" inserted in construction contracts, ²⁰⁴ and the "law is settled" that a proper liquidated damages provision can be valid and enforceable. ²⁰⁵ When determining whether a liquidated damages clause is enforceable, Virginia courts will examine two things. First, the court will determine whether, at the time of contract formation, the actual damages resulting from a breach were uncertain and difficult to ascertain. ²⁰⁶ If, at the time the contract was formed, the actual damages to be sustained from a breach were "susceptible of definite measurement," a liquidated damages provision establishing a different amount will be unenforceable. ²⁰⁷ Second, the courts will compare the amount of the liquidated damages to the amount of actual damages sustained by the non-breaching party. Although the amount of liquidated damages need not be identical to damages actually sustained in order for the clause to be enforceable, where the amount stipulated as liquidated damages "would be grossly in excess of actual damages," the court will treat the provision as a penalty and decline to enforce it. ²⁰⁸

5.603 Liability for Defects or Failures.

A. In General. A contractor may be held liable for construction defects or other failures relating to the...