Damages

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Dama ges 667
24.0   i nTR oduc Tio n
A. Over view of Chapter
The general principles that govern the award of damages in claims involving
construction disputes are no different 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 that requires attention to the particular circumstances
surrounding construction contracts.
This chapter begins with a brief review of the most important measures
of damages utilized in construction cases (Section 24.02). It then sets out the
particular application of these rules in the calculation and proof of damages in
the construction setting (Section 24.03) and discusses speci c legal doctrines
that serve to mitigate or bar construction claims (Section 24.04). The chapter
concludes by discussing contractual and other limitations on a party’s liability
for construction damages (Section 24.05). The function of this chapter is not to
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Damages
STE PHEN A. HE SS
C H A P T E R
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668 CO N S T R UC T I O N L AW
provide an exhaustive treatment of all the intricacies of damage doctrines and
the calculations of damages—it would take several books from a construction
law library to cover those matters in sufcient detail for the working construc-
tion lawyer—but rather to introduce the student to the most important con-
cepts in construction law damages.
B. “Me asures o f Damage s” vers us “Cause o f Actio n
This chapter is concerned 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 dam-
ages,” it is important to understand the distinction between the two concepts.1
A cause of action is a set of precise elements that a claimant must satisfy
to establish its entitlement to relief. Once the cause of action is proven and the
claimant has established its entitlement to relief, the amount of relief to which
the aggrieved party is entitled is dened by the measure of damages. As the
following discussion suggests, most causes of action are associated with a par-
ticular 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 below.
Moreover, as the reader will see, courts may modify a presumed measure of
damages (or substitute an alternative measure of damages) where the pre-
sumed 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, and 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 subcontractor’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.
Dama ges 669
24.02 general measures OF Damage s
The function of this section is twofold. First, it brings together a summary of
several measures of damages that 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 Co ntract a nd Relat ed Claim s
By far the most common claims related to construction projects are those
involving 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
award a sum that will 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 con-
tract. Generally, “rights of the parties with respect to a breach of contract are
xed at the time of breach, and damages are measured as of that time.”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 that applies to each is still 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 building
or construction project can be understood as contracting for three specic ben-
ets related to its project. First, the owner expects the contract to be completed
for the contract price. Second, the owner expects the project to be completed
2. Charlotte v. Skidmore, Owings and Merrill, 407 S.E.2d 571, 580 (N.C. App. 1991).
3. Hernandez v. Westoak Realty & Inv., Inc., 771 S.W.2d 876, 880 (Mo. Ct. App. 1989).
4. Fairway Builders, Inc. v. Malouf Towers Rental Co., Inc., 603 P.2d 513 (Ariz. Ct. App. 1979).

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