Has your contract been breached? Even if you are in the right, you should know that you may not be able to recover damages for all your expenses. Before rushing into litigation, it is important to consider which damages are recoverable. I find this topic very helpful to potential clients, because most people do not know how expensive and time consuming litigation can be.
Here are a few points to keep in mind:
Under Louisiana law, a contractor, subcontractor, owner, supplier, or any party to a construction contract is liable for the damages caused by the failure to perform a contractual obligation. Failure to perform may result from non-performance, defective performance, or a delay in performance.
The remedies for a breach of contract include either specific performance or damages, or a combination of both if applicable. La. Civ. Code art. 1986. You probably won’t get specific performance as a remedy in your construction case. For public policy purposes, if a contractor fails to perform or renders defective performance, a court will rarely demand that the contractor finishes the works. Instead, the court will generally grant contract damages. Money damages are typically preferred in civil matters.
Contract damages are supposed to place the non-breaching party in the position he would have been in had there been no breach of contract. Therefore, contract damages consist of the actual loss sustained by the non-breaching party, and the lost profits of which the breaching party has been deprived. In a construction claim, lost profits are usually calculated by taking the gross revenues that would have been received if there were no breach, and deducting from that the variable expenses that would have been incurred. Keep in mind that fixed costs such as overhead and depreciation are not ordinarily deducted from gross revenues when determining a damage award.
Attorneys’ fees are not generally recoverable damages in the absence of a statute or contract provision authorizing the recover of such expenses in the damages context. Parties are, however, allowed to privately contract with respect to attorneys’ fees. Unlike attorneys’ fees, investigation costs may be recoverable even if not privately contracted for ahead of time.In the context of a workplace accident, for example, Louisiana courts have upheld the reimbursement of investigation costs if such costs were material to determine the cause of the workplace accident.
Mitigation of Damages
Mitigation of damages is important. Each part must make reasonable efforts to mitigate damages caused by the other party’s breach of contract. Unnecessary or unreasonable damages may be challenged and not included in a damage award.
Always keep in mind that contract damages may not be awarded according to your initial calculations. Therefore, it is important to consult with an experienced attorney before bringing forth your breach of contract claim. Here at Smiley Law, we are always ready to take your contract questions.