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City of Elmira v. Walter, Inc.

Court of Appeals of the State of New York
Oct 16, 1990
76 N.Y.2d 912 (N.Y. 1990)

Summary

holding that, in the absence of “clear and unambiguous language” indicating that liquidated damages clause was intended to apply to contractor's “outright abandonment of the project,” no such damages should be awarded

Summary of this case from Cuesport Properties, LLC v. Critical Developments, LLC

Opinion

Argued September 11, 1990

Decided October 16, 1990

Appeal from the Appellate Division of the Supreme Court in the Third Judicial Department, William N. Ellison, J.

Laurence F. Sovik and James A. O'Shea for appellant.

Arthur S. Friedman, Leslie F. Couch and Joan R. Salzman for respondents.


MEMORANDUM.

The order of the Appellate Division should be affirmed, with costs.

This breach of contract action has its origins in an agreement for the construction of a municipal parking garage. While the construction project was underway, disputes arose concerning a number of issues, including defendant contractor's entitlement to progress payments. As a consequence of these disputes, defendant discontinued further work on the project some five months before the contractually designated completion date. Plaintiff was forced to retain another contractor to finish the project and, as a result, the municipal parking garage was not ready to open at the anticipated time. Following the final disposition of an arbitration proceeding, plaintiff commenced the present action against defendant contractor for breach of contract damages.

After protracted litigation, defendant was found to have breached its contractual obligations, and plaintiff was awarded actual damages, as well as liquidated damages. The latter award was based on a liquidated damage clause in the parties' agreement that provided: "As actual damages for any delay in completing the work * * * are impossible to determine, the Contractors and their Sureties shall be liable for * * * the sum of One Thousand Dollars * * * as fixed, agreed and liquidated damages for each calendar day of delay from the above stipulated completion * * * until such work is satisfactorily completed and accepted." On cross appeals, the Appellate Division modified the judgment by, inter alia, subtracting the portion of the award that represented liquidated damages under this clause. The propriety of the Appellate Division's decision on the liquidated damages question is the only issue before us on this appeal.

The liquidated damage clause on which plaintiff relies, by its terms, represents an attempt by the parties to anticipate and provide for the specific possibility that defendant's satisfactory completion of the project might be delayed beyond the agreed-upon date. The clause does not contain clear and unambiguous language, as it should, indicating that it was also intended to apply to defendant's outright abandonment of the project, an entirely separate eventuality. Thus, as in Murphy v United States Fid. Guar. Co. ( 100 App. Div. 93, 98, affd 184 N.Y. 543), "[t]he only reasonable interpretation which can be given to [the liquidated damage] provision is * * * that the liability for the stipulated sum did not accrue until the contractor had fulfilled [its] agreement," and, consequently, the provision is not available in a case such as this, involving a complete renunciation of the contract.

Plaintiff's contention that such an interpretation of its agreement would encourage contractors to abandon projects as a means of avoiding contractually agreed-upon liquidated delay damages is unavailing. Even assuming that such a concern has some practical foundation, owners who wish to protect themselves against it may negotiate for the inclusion of express contractual provisions for liquidated damages for delay even in the event of an abandonment. Accordingly, since these parties' contract contained no such express provision, plaintiff was not entitled to an award for liquidated damages.

Chief Judge WACHTLER and Judges SIMONS, KAYE, ALEXANDER, TITONE, HANCOCK, JR., and BELLACOSA concur.

Order affirmed, with costs, in a memorandum.


Summaries of

City of Elmira v. Walter, Inc.

Court of Appeals of the State of New York
Oct 16, 1990
76 N.Y.2d 912 (N.Y. 1990)

holding that, in the absence of “clear and unambiguous language” indicating that liquidated damages clause was intended to apply to contractor's “outright abandonment of the project,” no such damages should be awarded

Summary of this case from Cuesport Properties, LLC v. Critical Developments, LLC

denying award of late fees in case where defendant completely renounced contract; observing that total non-performance was an "entirely separate eventuality" from tardy payments

Summary of this case from Wells Fargo Bank Minnesota v. Brooksamerica Mortgage Corp.

In Elmira, the Contractor walked off the job and repudiated the contract five months prior to the contractually defined deadline.

Summary of this case from 1199 Housing Corp. v. Kelly Tank Co., Inc.
Case details for

City of Elmira v. Walter, Inc.

Case Details

Full title:CITY OF ELMIRA, Appellant, v. LARRY WALTER, INC., et al., Respondents, et…

Court:Court of Appeals of the State of New York

Date published: Oct 16, 1990

Citations

76 N.Y.2d 912 (N.Y. 1990)
563 N.Y.S.2d 45
564 N.E.2d 655

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