CACI 4532 Owner’s Damages for Breach of Construction Contract—Liquidated Damages Under Contract for Delay

California Civil Jury Instructions CACI

4532 Owner’s Damages for Breach of Construction Contract—Liquidated Damages Under Contract for Delay

[Name of plaintiff] claims that [name of defendant] breached the parties’ contract by failing to [substantially] complete the [project/describe construction project, e.g., apartment building] by the completion date required by the contract. If you find that [name of plaintiff] has proven this claim, the parties’ contract calls for damages in the amount of $ for each day between [insert contract completion date] and the date on which the project was [substantially] completed. You will be asked to find the date on which the project was [substantially] completed. I will then calculate the amount of damages.

[If you find that [name of plaintiff] granted or should have granted time extensions to [name of defendant], you will be asked to find the number of days of the time extension and add these days to the completion date set forth in the contract. I will then calculate [name of plaintiff]’s total damages.]

Directions for Use

This instruction should be used when the owner seeks to recover liquidated damages against the contractor for delay in completing the project under a provision of the contract. Include the optional second paragraph if there is a dispute over whether the contractor is entitled to an extension of time. Give CACI No. 4520, Contractor’s Claim for Changed or Extra Work, to guide the jury on how to determine if the contractor is entitled to a time extension for extra work. A special instruction may be required to guide the jury on how to determine if the contractor is entitled to a time extension for excusable or compensable delays.

Include “substantially” throughout if there is a dispute of fact as to when the project should be considered as finished. Unless otherwise defined by the contract to mean actual completion or some other measure of completion (see, e.g., London Guarantee & Acc. Co. v. Las Lomitas School Dist. (1961) 191 Cal.App.2d 423, 427 [12 Cal.Rptr. 598]), “completion” for the purpose of determining liquidated damages ordinarily is understood to mean “substantial completion.” (See Vrgora v. L.A. Unified Sch. Dist. (1984) 152 Cal.App.3d 1178, 1186 [200 Cal.Rptr. 130]; see generally Perini Corp. v. Greate Bay Hotel & Casino, Inc. (1992) 129 N.J. 479, 500–501, overruled on other grounds in Tretina v. Fitzpatrick & Assocs. (1994) 135 N.J. 349, 358 [discussing standard practices in the construction industry].)

There are few or no general principles set forth in California case law as to what may constitute substantial completion. It would seem to be dependent on the unique facts of each case. (See, e.g., Continental Illinois Nat’l Bank & Trust Co. v. United States (1952) 121 Ct.Cl. 203, 243–244.) The related doctrine of substantial performance, which allows the contractor to obtain payment for its work even if there are some minor or trivial deviations from the contract requirements, may perhaps be looked to for guidance for when a project is substantially complete for purposes of stopping the running of the clock on liquidated damages. (See CACI No. 4524, Contractor’s Claim for Compensation Due Under Contract—Substantial Performance.) But they are separate doctrines. Substantial performance focuses on what was done. Substantial completion focuses on when it was done. (See Hill v. Clark (1908) 7 Cal.App. 609, 612 [95 P. 382] [only substantial performance, not substantial completion, was at issue].) See also Code Civ. Proc., § 337.15 and CACI No. 4551, Affirmative Defense—Statute of Limitations—Latent Construction Defect (limitation period begins to run on substantial completion).

If the liquidated damages provision is found to be unenforceable because its enforcement would constitute a penalty rather than an approximation of actual damages that are difficult to ascertain, the owner may be entitled to recover its general and special damages, as those damages are defined in CACI No. 350, Introduction to Contract Damages, and CACI No. 351, Special Damages.

Sources and Authority

Excused Performance of Contract. Civil Code section 1511(1).

Liquidated Damages. Civil Code section 1671(b).

Time for Completion: Liquidated Damages. Public Contract Code section 10226.

“Liquidated damage clauses in public contracts are frequently validated precisely because delay in the completion of projects such as highways ‘would cause incalculable inconvenience and damage to the public.’ … Thus, it is accepted that damage in the nature of inconvenience and loss of use by the public are real but often, as a matter of law, not measurable.” (Westinghouse Electric Corp. v. County of Los Angeles (1982) 129 Cal.App.3d 771, 782–783 [181 Cal.Rptr. 332], internal citations omitted.)

“[I]n the absence of a contractual provision for extensions of time, the rule generally followed is that an owner is precluded from obtaining liquidated damages not only for late completion caused entirely by him but also for a delay to which he has contributed, even though the contractor has caused some or most of the delay. … Acceptance of the reasoning urged by defendant would mean that, solely because there has been noncompliance with an extension-of-time provision, the position of an owner could be completely changed so that he could withhold liquidated damages for all of the period of late completion even though he alone caused the delay.” (Peter Kiewit Sons’ Co. v. Pasadena City Junior College Dist. (1963) 59 Cal.2d 241, 245 [28 Cal.Rptr. 714, 379 P.2d 18], internal citation omitted.)

“If the contractor wished to claim it needed an extension of time because of delays caused by the city, the contractor was required to obtain a written change order by mutual consent or submit a claim in writing requesting a formal decision by the engineer. It did neither. The court was correct to rely on its failure and enforce the terms of the contract. It makes no difference whether [contractor]’s timely performance was possible or impossible under these circumstances. The purpose of contract provisions of the type authorized by the 1965 amendment to Civil Code section 1511, subdivision 1, is to allocate to the contractor the risk of delay costs—even for delays beyond the contractor’s control—unless the contractor follows the required procedures for notifying the owner of its intent to claim a right to an extension.” (Greg Opinski Construction, Inc. v. City of Oakdale (2011) 199 Cal.App.4th 1107, 1117–1118 [132 Cal.Rptr.3d 170].)

“[A]cceptance may not be arbitrarily delayed to the prejudice of a contractor, and work should be viewed as accepted when it is finished even though a governmental body specifies a later date.” (Peter Kiewit Sons’ Co.supra, 59 Cal.2d at p. 246.)

“Lacking any authority, appellant asserts ‘that something is wrong here’ and ‘[it] does not make sense to compensate the owner for the loss of use of something that it is actually using.’ For all practical purposes, we perceive appellant as attempting to invoke the equitable doctrine of unjust enrichment and therein seek a setoff. The No. 1 problem with the applicability of said theory is that although [defendant] may have benefitted by using the facility, the fact that the facility had not been fully or even substantially completed suggests that the enrichment obtained is de minimis or is at best undefinable.” (Vrgorasupra, 152 Cal.App.3d at p. 1186, footnote omitted.)

“Was the contract completed on September 5, 1953? The trial court did not find that the building was completed on that date. It found that it was ‘substantially completed.’ On September 8, 1953, the uncontradicted evidence shows that some of the class rooms were insufficiently complete to be used; the plumbing was not complete; and the fencing of the playground had not been started. There were workmen in the building and there was grading equipment in the yard area. The salary of the inspector for the school district, who was required by state law, had to be paid until October 22, 1953. The inspector’s report made on September 1, 1953, showed that the work was 94 per cent complete as of that time. His report made on September 16, 1953 showed the work to be 96 per cent complete. On September 16 there was admittedly about $ 9,800 worth of work yet to be done. The contract called for a complete building and not a substantially complete one. [¶] The fact that the school district occupied portions of the building on September 8, 1953, does not change the situation. [The contract] provides that occupancy of any portion of the building ‘… shall not constitute an acceptance of any part of the work, unless so stated in writing by the Board of the District.’ The board of the district did not so state.”(London Guarantee & Acc. Co.supra, 191 Cal.App.2d at pp. 426–427.)

“In London Guar. & Acc. Co. v. Las Lomitas School Dist.supra, 191 Cal.App.2d 423, the appellate court reviewed the efficacy of an ‘adjusted’ liquidated damages award by the trial court on the basis of the date of ‘substantial completion’ as opposed to ‘actual completion.’ … The appellate court reversed the trial court’s judgment, finding no validity to the argument employed at trial, that once the contractor had substantially performed his obligation (96 percent completion of the building), the school district was not entitled to liquidated damages. In effect, the court held that since the parties contracted for ‘actual’ performance in the form of a ‘… complete building and not a substantially complete one’, liquidated damages were appropriate.” (Vrgorasupra, 152 Cal.App.3d at p. 1187, internal citation omitted.)

“We perceive no error in the action of the court sustaining the objection to a question asked defendant, as follows: ‘Can you state to the court how much and to what extent you have been injured by the failure of the plaintiff to complete this work; the question is, can you tell?’ The contract provided for a fixed sum as liquidated damages for delay in the completion of the work beyond the time specified in the contract. No issue was presented as to the amount of the liquidated damages, or claim on account thereof, and the question objected to could have no reference thereto; and the court finding that the contract was substantially completed, there was no room for inquiry as to the damages, and no prejudice could result to defendant from such ruling.” (Hillsupra, 7 Cal.App. at p. 612.)

“Finding 51 shows that the work … was 99.6% complete on December 30, as of which day liquidated damages began, and that the only work remaining to be done had to do with the boiler house equipment, and certain ‘punch list items’ which are usually minor adjustments which recur for an indefinite time after the completion of an extensive building project. The boiler house work would, apparently, not have interfered with the occupancy of the houses by tenants, and tenants in new houses expect to be troubled for a while by adjustments due to tests. Two hundred dollars a day was a severe penalty for so slight an asserted delinquency and our observation of other cases tells us that it is not customary to draw the line so strictly. The refusal, which we hold unjustified, of the Government to accept the project on December 30, 1936, subjected the contractor, not only to the liquidated damages discussed above, but to continued expenditures for coal, light, power and fire insurance in the amount of $2,454.75. The plaintiff may recover this amount.” (Continental Illinois Nat’l Bank & Trust Co.supra, 121 Ct.Cl. at pp. 243–244.)

Secondary Sources

1 Witkin, Summary of California Law (11th ed. 2017) Contracts, § 507
1 California Construction Contracts, Defects, and Litigation (Cont.Ed.Bar) Ch. 5, Private Contracts: Disputes and Remedies, § 5.112
1 California Construction Contracts, Defects, and Litigation (Cont.Ed.Bar) Ch. 6, Public Contracts: Disputes and Remedies, § 6.91 et seq.
2 California Construction Contracts, Defects, and Litigation (Cont.Ed.Bar) Ch. 9, Handling Disputes During Construction, §§ 9.103, 9.107
3 Stein, Construction Law, Ch. 11, Remedies and Damages, ¶ 11.02 (Matthew Bender)
12 California Real Estate Law and Practice, Ch. 434, Government Contracts, § 434.41 (Matthew Bender)
10 California Forms of Pleading and Practice, Ch. 104, Building Contracts, §§ 104.27, 104.226 (Matthew Bender)
5 California Points and Authorities, Ch. 50, Contracts, § 50.211 (Matthew Bender)
15 California Legal Forms, Ch. 30D, Construction Contracts and Subcontracts, § 30D.224 (Matthew Bender)
27 California Legal Forms, Ch. 75, Formation of Contracts and Standard Contractual Provisions, § 75.243 (Matthew Bender)
Matthew Bender Practice Guide: California Contract Litigation, Ch. 7, Seeking or Opposing Damages in Contract Actions, 7.05[3]
Miller & Starr, California Real Estate 4th, § 27:81 (Thomson Reuters)
Acret, California Construction Law Manual (6th ed.) §§ 1:86–1:88, 7:84, 7:85 (Thomson Reuters)
Bruner & O’Connor on Construction Law, §§ 15:15, 15:82 (Thomson Reuters)
Gibbs & Hunt, California Construction Law, Ch. 5, Breach of Contract by Contractor, § 5.02 (Aspen Pub. 16th ed. 1999)