Determining Damages in your Construction Case

When construction companies are kicked off of a job or when there is a dispute for the proper amount of their bill, a major point of dispute is how the damages will be determined. “Damages” is a legal term referring to the amount of money the wronged party is owed.

It’s not enough to simply say that there is a contract price and you’re entitled to it. Rather, the courts will ask what damages you have suffered and attempt to “make you whole.”  There are several types of damages that are typically considered in breach of contract cases and we have discussed that in some of our other articles.  However, this article will focus on three types of damages that a construction company that’s been fired should consider claiming in determining what they’re entitled to in a court of law.

  1. Lost Profits

The most important area of damages is the lost profits that a company expected as a result of the job at hand. This is determined by asking how much money the company was going to be paid for the rest of the job and subtracting any costs that you expected to incur in finishing the job. For example, if there was $10,000 worth of work left on a job and you expected to spend $2,000 in materials and another $1,000 in other costs, your lost profits is $7,000. This should be added to the amount of any unpaid invoices in making a demand and dealing with the litigation in court. Courts will typically not award you the full $10,000 in such a case.

  1. Home Office Costs and Staffing Needs.

A construction company that undertakes a large job, in particular, will also want to factor in the lost time and efforts of its staff.  In this, we are not referring to the time and effort expended on parts of the project that are already finished, but rather to the efforts in coordinating with the customer, dealing with their concerns, working with sub-contractors and other items that are not explicitly apart of your typical bill. These are “costs” that should be factored into the amount of money that you are owed. Determining how much you are owed can be aided by certain mathematical formulas such as Eichleay formula. This formula is used by the federal government with its contractors and has largely been adopted by federal courts. But it is applicable in state court too. It can be used to demonstrate the amount of money that your company has expended in terms of its focus, the focus of its home office staff, and work that has been done to facilitate a project that’s been cancelled part way through.

  1. Lost Opportunities and Lost Volume of Sales

Finally, in determining amounts that you may be owed in a construction dispute, it is important to remember that you have lost the opportunity to bid on other jobs and perhaps turned down other construction projects to make sure that you were able to meet this particular customer’s needs. When a customer cancels in the middle of a job, there is usually no way to get those customers back. This is known as “lost volume”. This is money that you will never get back, and as a result, this lost volume is an element of damages that you’re owed by the breaching party.

Conclusion

If you’ve been stiffed on a construction job, our attorneys can help you. It is important for you to have competent representation and to work with attorneys who understand your industry.  At Cornerstone Law Firm, we help contractors of all sizes to recoup their costs after breached contracts. Call us today to discuss your case and see if we can help.