Damages

• Author: Carol J. Patterson - Ross J. Altman - Stephen A. Hess - Allen Overcash
• Pages: 717-757

CHAPTER

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Damages

STEPHEN A. HESS AND ALLISON T. MIKULECKY

22.01 INTRODUCTION

A. Overview of Chapter

The general principles that govern the award of damages in claims involving

construction disputes do not differ from those employed in other cases. At

the same time, the application of these principles to construction claims pro-

vides special considerations that make the assessment of damages a matter of

substantial complexity requiring attention to the particular circumstances sur-

rounding construction contracts.

This chapter begins with a brief review of the most important measures

of damages utilized in construction cases (Section 22.02). The chapter then

sets out the particular application of these rules in the calculation and proof of

damages in the construction setting (Section 22.03) and discusses specic legal

doctrines that serve to mitigate or bar construction claims (Section 22.04).

Finally, the chapter concludes by discussing contractual and other limitations

22

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CONSTRUCTION LAW

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on a party’s liability for construction damages (Section 22.05). The function

of this chapter is not to provide an exhaustive treatment of all the intricacies

of damage doctrines and the calculations of damages—several books from a

construction law library would be required to cover those matters in sufcient

detail for the working construction lawyer—but rather to introduce the reader

to the most important concepts in construction law damages.

B. “Measures of Damages” versus “Cause of Action”

This chapter concerns with the calculation of damages once a claim is proven

and does not discuss in detail the various substantive claims that a party may

try to establish related to a construction project. Although a specic “cause of

action” may be closely intertwined with a related “measure of damages,” the

distinction between the two concepts is important to understand.1

A cause of action is a set of precise elements that a claimant must satisfy

to establish its entitlement to relief. Once the claimant proves the cause of

action, and the claimant has established its entitlement to relief, the measure

of damages denes the amount of relief to which the aggrieved party is enti-

tled. As the following discussion suggests, most causes of action are associated

with a particular measure of damages.

However, some causes of action leave the claimant with the right to choose

among various measures of damage with respect to quantum meruit. More-

over, as the reader will see, courts may modify a presumed measure of dam-

ages (or substitute an alternative measure of damages) where the presumed

measure of damages would result in injustice to one of the parties, as in the

case of economic waste.

Finally, the careful reader will learn that judicial opinions are not always

careful to distinguish between causes of action and measures of damages. Any

person who delves into the world of “unjust enrichment” or “quantum meruit”

will learn quickly that those phrases can be used to refer to causes of action,

to measures of damages, or to both at the same time. This is not a matter of

sloppy writing or muddled thinking by the courts. Rather, it is a consequence

of the very close relationship between causes of action and damages; with a

little experience in this arena, an attorney can uidly move between the ana-

lytically distinct concepts.

1. See, e.g., Pepi Corp. v. Galliford, 254 S.W.3d 457, 2007 WL 441582 (Tex. Ct. App. 2007), in

a dispositive issue related to competing statutes of limitations, the court held that a subcontrac-

tor’s claim against a property owner was a quantum meruit claim founded on general principles

of unjust enrichment, rather than an independent cause of action for unjust enrichment—which

cause Texas recognizes.

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Damages 719

22.02 GENERAL MEASURES OF DAMAGES

The function of this section is twofold. First, this section brings together a

summary of several measures of damages that law students often encounter

in different courses. Second, it provides some glimpse into how the common

measures of damages play out in the context of construction cases.

A. Breach of Contract and Related Claims

By far the most common claims related to construction projects involve breach

of contract.

1. Expectation Interest (Breach of Contract)

Generally, “a party is entitled to have what he contracts for or its equivalent,”2

which is another way of saying that a party is entitled to the “benet of his

bargain.” When a breach by the opposing party deprives the claimant of the

benet of that bargain, a court will endeavor to protect that benet; in other

words, the goal in fashioning a remedy for the breach of most contracts is to

put the non-breaching party “in as good a position as he would have been in

had the contract been performed.”3 In literature, this is generally referred to as

a party’s “expectation interest” in the fruit of its contract. Generally, “[s]uch

damages are measured as of the date of the breach.”4

Although this single measure of damages applies to most breach of con-

tract cases, the specic rules that apply toward calculating a party’s “benet

of the bargain” may vary, depending on whether the claimant is an owner, a

design professional (or construction manager), or a contractor (or subcontrac-

tor). The following discussion summarizes the typical damages that each of

these parties may seek to recover. At the same time, the reader should bear

in mind that the general measure of damages applying to each remains the

same—the parties all want to get the benet of their respective bargains—but

the manner of calculating that benet differs from one party to the next.

a. Owner’s Damages

From the perspective of understanding damage claims, the owner of a build-

ing or construction project can be understood as contracting for three specic

benets related to the owner’s project. First, the owner expects the contract to

be completed for the contract price. Second, the owner expects the project to

2. Champion Cos. of Wis., Inc. v. Stafford Dev., Ltd. Liab. Co., 794 N.W.2d 916, 918 (Wis. Ct.

App. 2010).

3. Shafer Elec. & Constr. v. Mantia, 96 A.3d 989, 995 (Pa. 2014) (home improvement contract).

4. Morgillo v. Empire Paving, Inc., 118 A.3d 760, 770 (Conn. App. Ct. 2015) (paving contract).

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