March 13, 2008

Court finds contractual liquidated damage provision of $250 per day for contractor's failure to complete work reasonable


Claimant/Appellant Temple Baptist Church brought suit against Defendant/Appellee C & H Commercial Contractors, Inc. to enforce a provision for liquidated damages pursuant to a construction contract entered into by the parties. The contract contained a provision for liquidated damages at the rate of $250.00 per day if the contractor failed to complete the work within the time required by the contract. Temple Baptist Church also sought awards for a credit due under the contract for sales tax and for the contractor's failure to obtain a bond. C & H Commercial Contractors filed an answer and counterclaim alleging that the church had wrongfully terminated the contract. The case was tried without a jury in March of 2006. The trial court found that both parities were mutually responsible for the delay in construction for a period of 220 days. The trial court found that the contractor was responsible for delays after this period and awarded liquidated damages in the amount of $14,250.00. The trial court also awarded attorney fees in the amount of $16,034.50, but denied the credits sought by the church. We affirm.

Opinion may be found at:

"The term “liquidated damages” means a sum stipulated and agreed upon by the parties at the time they enter their contract, to be paid to compensate for injuries should a breach occur. 22 Am Jur Damages § 212 (1965); See Railroad v. Cabinet Co., 104 Tenn. 568, 58 S.W.303 (1900). The reason for allowing the parties to stipulate the amount of damages is to create certainty where damages are likely to be uncertain and not easily proven. Railroad, supra. The amount stipulated should be reasonable in relation to the terms of the contract and the certainty with which damages can be measured, there must exist a reasonable relationship between the amount and what might reasonably be expected in the event of a breach. Id. If the provision is a reasonable estimate of the damages that would occur from a breach, then the provision is normally construed as an enforceable stipulation for liquidated damages. See Bristol v. Bostwick, 146 Tenn. 205, 240 S.W.774 (1922); 22 Am Jur Damages § 227 (1965). A party will not be allowed, however, to recover liquidated damages where he is responsible for or has contributed to the delay or non performance alleged as a breach. (citations omitted)." Id.

"The pastor of Temple testified that the liquidated damages would reflect the loss of donations, tuition for the private school, and escalation of building costs. The pastor further testified that Temple was expecting donations to the church to increase as the building progressed. Again, it is implicit in the trial court’s findings that the sum of $250.00 was reasonable. After review of the record, we find that the evidence does not preponderate against the trial court’s award of $14,250.00 in liquidated damages." Id.