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Keywords

contractdamagestrialliquidated damages
contractdamagestrialliquidated damages

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Reliance Ins. Co. v. Utah Dept. of Transp., 858 P.2d 1363

Facts

In 1985, UDOT awarded a contract to L.A. Young Sons Construction Company to raise a section of Interstate Highway 80 due to rising water levels from the Great Salt Lake. The contract stipulated a completion date of October 15, 1985, with a liquidated damages provision of $600 per day for delays. Young requested extensions, and despite completing major work by October 25, 1985, additional work remained, leading to a total delay of 156 days. UDOT withheld $93,600 in liquidated damages, prompting Reliance Insurance Company, the surety for Young, to seek recovery of this amount.

On April 30, 1985, the Utah Department of Transportation (“UDOT”) awarded a construction contract to L.A. Young Sons Construction Company (“Young”) to raise a section of the highway and protect it from the lake waters.

Issue

Did the trial court err in enforcing the liquidated damages provision against Reliance Insurance Company, and does the doctrine of substantial completion apply to this case?

We examine the validity of the liquidated damages provision and determine whether the doctrine of substantial completion applies to these facts.

Rule

The enforceability of a liquidated damages provision is determined by whether the amount fixed is a reasonable forecast of just compensation for the harm caused by the breach and whether the harm is difficult to estimate accurately.

In determining the validity of a liquidated damages provision, this court has adopted section 339 of the Restatement of Contracts.

Analysis

The court found that the liquidated damages provision of $600 per day was a reasonable forecast of the actual damages UDOT incurred due to the delays. The trial court's findings were supported by evidence that UDOT incurred additional overhead costs as a result of Young's delay, and the court determined that the harm caused by the breach was difficult to estimate at the time of contract formation. The court also concluded that the doctrine of substantial completion did not apply, as the contract explicitly required final completion.

The trial court upheld the liquidated damages provision as binding upon the parties.

Conclusion

The Supreme Court of Utah affirmed the trial court's judgment, upholding the liquidated damages provision and allowing UDOT to retain the withheld amount of $93,600.

Affirmed.

Who won?

Utah Department of Transportation prevailed in the case because the court upheld the validity of the liquidated damages provision and found that the damages were reasonable and enforceable.

Reliance brought this action to recover the $93,600 withheld by UDOT.

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