Legal Problems Arising out of Highway Programs. Topic 25-05. The Legal Issues Associated with Consequential Damages Provisions in Construction Contracts

A crucial and often contentious element for any transportation construction contract is the identification and allocation of potential damages and liabilities among the parties. Contractual provisions can derail negotiations if too rigid or leave the public entity with unnecessary risk exposure if not carefully drafted. Consequential damages are often restricted in construction contracts to limit the state department of transportation's (DOT) exposure to potential liability. Parties seek to limit liability by including a clause to preclude recovery of consequential damages, i.e., losses “fairly and reasonably” arising from the breach of the contract. Research is needed on the legal issues associated with consequential damages provisions in construction contracts. This study should take into account the contract value as well as the type of project. For purposes of this study, consequential damages are defined as damages that can be proven to have occurred because of the failure of one party to meet a contractual obligation. They go beyond the contract itself and into the actions that flow from the failure to fulfill. Consequential damages occur when the contractor breaches a contract and is liable for all foreseeable losses incurred by the owner. They also go beyond the express terms and conditions of the contract itself and into the actions that flow from the breach. Some examples include any profits, rents, financing costs, or business opportunities that are lost. The objective of this research is to produce a legal research digest that will provide trends among major transportation construction contracts as they relate to consequential damages, and create an elemental framework for inclusion in construction contracts.

Language

  • English

Project

  • Status: Proposed
  • Funding: $75000
  • Contract Numbers:

    Project 20-06, Topic 25-05

  • Sponsor Organizations:

    National Cooperative Highway Research Program

    Transportation Research Board
    500 Fifth Street, NW
    Washington, DC  United States  20001

    Federal Highway Administration

    1200 New Jersey Avenue, SE
    Washington, DC  United States  20590

    American Association of State Highway and Transportation Officials (AASHTO)

    444 North Capitol Street, NW
    Washington, DC  United States  20001
  • Project Managers:

    Chisholm-Smith, Gwen

  • Start Date: 20200120
  • Expected Completion Date: 0
  • Actual Completion Date: 0

Subject/Index Terms

Filing Info

  • Accession Number: 01713236
  • Record Type: Research project
  • Source Agency: Transportation Research Board
  • Contract Numbers: Project 20-06, Topic 25-05
  • Files: TRB, RiP
  • Created Date: Aug 5 2019 3:23PM