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EFFECTIVE LEGAL GUIDANCE FOR FAMILIES AND BUSINESSES

Real estate disputes can involve consequential damages

| Sep 23, 2020 | Real Estate |

Construction projects are often complicated regardless of whether it is a house or multi-use high-rise. There are a variety of parties involved, including owners, architects, contractors, and suppliers. These interrelated partnerships are defined by contracts that outline work, pay, deadlines, goods, and services.

Breaches can lead to damages

Unfortunately, projects often do not go as planned. It can mean a breached contract that is grounds for damages. Direct damages can be not paying a bill, the expense of fixing an error or adding additional costs. While direct damages are easy to document, consequential or indirect damages are harder to define. For the claim to be valid, the claimant must prove that the damages were reasonably foreseeable when drafting the contract, and the breach proximately led to damages. Examples of consequential damages include:

  • The owner seeks damages because the building was not finished on time, thus depriving them of use or rental income.
  • A contractor cannot get other work because the breach caused harm to their reputation, or it prevented them from working on other projects.
  • The breach caused a loss of bonding or an increase in the expense of bonding.

These damages can be controlled

In efforts to mitigate the extreme expense of some breaches, there may be waivers in the contract. It can reduce the risk of working on a large or complicated project and lead to more competitive bids for work. Liquidated damages are also an option – this can mean a specific amount for anticipated damages or penalty per day for being late with deliverables. For the courts to enforce them, the terms should be reasonable (a capped percentage of the contract).

Contracts protect businesses

Those signing a contract mustn’t endanger the viability of their business. There could be unrealistic terms, penalties or damages that can put the company out of business, so it is essential for those involved in building projects to consult with a knowledgeable real estate law attorney. These legal professionals can recognize consequential damages clauses as fair or unfair and help clients avoid other disputes that could damage a business.