Those harmed by breach of a construction contract in Kentucky can recover a variety of damages for their losses stemming from the breach.
When one of the parties to a construction contract fails to meet his or her obligations under the contract, it can cause more than just frustration and delays. People often lose money when they are victims of contract breaches, and they can seek compensation for their losses.
Losses from contract breach
Unless the contract specifically prohibits it, a person who has been harmed by the breach of a construction contract can recover a variety of damages. A person may seek actual damages, the amount of money that the person lost as a direct result of the breach, as well as incidental damages, which are the additional expenses that the person incurred because of the breach.
A person may also seek consequential damages, which are economic losses a person suffered which were not directly resulting from the breach, but are related to the breach. Some examples of consequential damages include lost profits, delay, unabsorbed overhead and loss of bonding capacity. Courts will only award consequential damages if they were foreseeable at the time the parties entered into the contract.
Many construction contracts have liquidated damages clauses that state precisely how much each party can recover in the event of a breach. Courts will enforce these clauses if they bear a reasonable relation to the costs involved in the contract.
Statutes governing recovery of damages
In 2007, Kentucky passed the Kentucky Fairness in Construction Act limiting the damages recoverable in some construction contract disputes. The Act prohibits "no damages for delay" clauses, which are clauses that waive the rights of contractors or subcontractors to recovery costs or damages for delay that were in the control of the owner of the property. The Act only applies to commercial construction contracts.
Kentucky law also prohibits clauses in construction contracts that attempt to hold a contractor harmless from his or her own negligence or the negligence of his or her agents.
Punitive damages and attorneys' fees
A person harmed by a breach of a construction contract can only recover attorneys' fees if the contract allows for them or if they are allowed under the Kentucky Building Code. The Kentucky Building Code awards damages for the cost of bringing a building up to code compliance or the diminution in fair market value because of code violations, in addition to litigation costs and attorneys' fees.
Kentucky courts will only award punitive damages when one party to the contract has committed tortuous conduct, which means that the party has conducted malicious or wanton acts resulting in harm. The court will not allow punitive damages when there is only economic loss, not personal injury.
Recovering for losses stemming from a breach of a construction contract can be crucial to keeping a business afloat. It is important for those who have been victims of contract breaches to have the assistance of a seasoned business litigation attorney to help resolve the dispute. If you have been the victim of a breach of contract, speak to an experienced breach of contract lawyer who can help you recover all of the damages available to you under the law.
Keywords: breach of contract; remedy; construction law