Instructions: Write a 3-5 page paper in response to the fact scenario provided b
ID: 1710582 • Letter: I
Question
Instructions: Write a 3-5 page paper in response to the fact scenario provided below. The paper must be double-spaced and include a list of work cited (not included in the page count). You may use outside sources for this paper but you are not required to. All of the information you need to complete this paper is provided in the course materials. However, you still need to include in-text citations when you use any source in this paper. The paper must be submitted into your Assignment folder.
Fact Scenario – Part 1: Contractors, Inc. contracted with YourCollege to build a 20-room, 2-story classroom building, constructed of gray bricks, and according to architectural specifications provided by YourCollege. The building is to be located on campus at the corner of Campus Way and Academic Avenue at a contract cost of $5,000,000, and to be completed by August 1, 2016. This August 1 deadline would give YourCollege just enough time to move into the building and prepare the inside for classes to begin August 14. Your College informed Contractors that time was of the essence and that this is a tight timeline for moving into the new building.
The valid, written contract read, in part, as follows:
CONTRACT
We, the undersigned, party of the first part, hereinafter YourCollege, and party of the second part, hereinafter Contractors, Inc. hereby agree to the following:
1) Contractors, Inc. will build a 20-room, 2-story classroom building constructed of gray bricks, at the corner of Campus Way and Academic Avenue, in accordance with the architectural specifications stipulated by YourCollege and attached hereto and in compliance with Maryland building codes and regulations for new construction;
2) Contractors, Inc. will complete the construction project at a total cost of $5,000,000, inclusive;
3) Contractors, Inc. will complete the construction project not later than August 1, 2016. Time is of the essence.
YourCollege will pay Contractors, Inc. for the completed project, the sum of $5,000,000 not later than August 7, 2016.
Signed:
John Smith [sign]
John Smith
President, YourCollege
Date: January 10, 2016
Signed:
John Doe [sign]
John Doe
President, Contractors, Inc.
Date: January 10, 2016
Fact Scenario - Part 2
On May 28, 2016, after the construction was more than half completed, the cost of bricks used for construction of the building increased substantially in the marketplace so that Contractors could no longer construct the building for $5,000,000. Contractors told YourCollege that it would need an additional $250,000 to complete the building using gray bricks on the exterior. YourCollege agreed to modify the original contract to increase the construction costs by $250,000, bringing the total cost of the project to $5,250,000.
YourCollege and Contractors drew up the following contract modification as an addendum to the original contract:
CONTRACT ADDENDUM
We, the undersigned, party of the first part, hereinafter YourCollege, and party of the second part, hereinafter Contractors, Inc. hereby agree to the following modification to the original agreement:
1) In addition to the contractual agreed upon cost of $5,000,000, YourCollege will pay Contractors, Inc. an additional $250,000 to build a 20-room, 2-story classroom building constructed of gray bricks, at the corner of Campus Way and Academic Avenue;
2) YourCollege will pay Contractors, Inc. for the completed project, the sum of $5,250,000 not later than August 7, 2016;
3) This modification does not in any way change any other terms of the original contract (attached hereto).
Signed:
John Smith [sign]
John Smith
President, YourCollege
Date: June 1, 2016
Signed:
John Doe [sign]
John Doe
President, Contractors, Inc.
Date: June 1, 2016
After the contract modification, Contractors continued to work on the building but did not meet the August 1 completion deadline. The building was completed on August 21, 2016.
In the meantime, fall semester classes began at YourCollege on August 14, making it necessary for YourCollege to lease classroom space from August 14-September 4, 2016. YourCollege necessarily had to hold classes in the leased space for 3 weeks until September 4 because it took 2 weeks (from August 21) for YourCollege to move into the new building and prepare it for classes. The lease costs were $5,000 per week, for a total of $15,000 for 3 weeks.
YourCollege paid Contractors $5,000,000 on September 4, but refused to pay the additional $250,000. YourCollege filed suit against Contractors for breach of contract.
Contractors countersued YourCollege for breach of contract.
Questions to Address in your Paper:
Please label each part of paper as listed below.
Part I: Discuss the basis of a breach of contract claim by YourCollege against Contractors, any potential damages YourCollege could claim and the likely outcome of a lawsuit.
3-4 paragraphs minimum with in text cites; in depth, comprehensive; outside resources not necessary as all classroom resources will be sufficient.
Part II: Discuss the basis of a breach of contract claim of Contractors against YourCollege, any potential damages Contractors could claim and the likely outcome of a lawsuit.
3-4 paragraphs minimum with in text cites; in depth, comprehensive; outside resources not necessary as all classroom resources will be sufficient.
NOTE - You must provide a detailed analysis and scrutiny of the facts in this case. You should identify: a) the legal issues presented, b) the relevant rules of law that apply, c) your analysis of the case and d) your conclusions about the outcome. In order to earn full credit, your analysis must be well supported by legal principles found in your sources. If you assert your opinion or your conclusions, it is important to show how you arrived there. What are you relying upon to draw your conclusions (what facts and what laws)? Please let me know if you have questions.
BUSINESS LAW I
Explanation / Answer
Part I: Discuss the basis of a breach of contract claim by YourCollege against Contractors, any potential damages YourCollege could claim and the likely outcome of a lawsuit.
Basis of a breach of contract claim by YourCollege against Contractors: As per the specification of the contract the project had to be completed no later than August 1 2016, and the clause “Time is of the essence: was included in the contract. However, the contractors failed to achieve the set deadline because of which YourCollege suffered losses. Tritely, the failure to meet the time deadline is a most probable source of dispute. These disputes concern the cause of any delay, the contractor’s responsibility to achieve the required schedules, and the costs to be assessed as a result of missed deadlines.
Any potential damages YourCollege could claim: time is the most important element in construction contracts and the works should be carried out with full vigor. The clause “Time is of the essence” in the contract means that the contractor is liable for any damages that might occur due to the delay in the contract even if it is not the contractor’s fault. However, since the delay occurred, for each day that the construction of the college building remained uncompleted beyond the time specified in the contract, the contractor shall be liable for liquidated damages in the amount(s) provided for in the solicitation. However, due account shall be taken of any adjustment of specified completion time for completion of work as granted by approved change orders by both parties. However no change orders were issued in this case. Hence the contractor is liable for damages.
Likely outcome of a lawsuit: In addition to the extra amount for bricks included in the contract, the contractor should also have applied for an extension of time. However this was not done which qualifies Yourcollege to put forth a claim for liquidated damages since the “Time is of the essence” clause was included in the contract.
If the YourCollege and the Contarctor agree on a liquidated damages provision, court will generally enforce them.
However, Maryland courts have made clear that such provisions may not properly be used to “penalize” one party for failure to comply with its obligations. They may only be enforced if it can be shown that at the time the contract was made:
(1) Both YourCollege and the contractor intended that the amount quoted in the contract was reasonable enough for breach of contract
(2) It would have been difficult to assess the damages due to breach of contract at the time of entering into the contract
However, if the court thinks that the amount of liquidated damages claimed is exorbitantly high and unreasonable then the liquidated damages might not be enforced.
At the time of enforcing the liquidated damages resulting from the breach of construction contract due to time delay, the Maryland court will analyze the position of both parties at the time of signing the contract to determine the genuineness of the amount of damages.
The lease amount that the college had to pay due to delay of the construction of college building and the 2 weeks the studies that were hampered which ultimately made the students suffer and a probable delay of the semester would all be concluded in the damages. The court generally appoints experts to assess all damages which may end up as liquidated damages.
Part II: Discuss the basis of a breach of contract claim of Contractors against YourCollege, any potential damages Contractors could claim and the likely outcome of a lawsuit.
Breach of contract claim of Contractors against YourCollege: Non-payment of the total amount after completion of the project as agreed by both parties at the time of entering into the contract is the basis of breach of contract claim.
Any potential damages Contractors could claim: The contractors might claim that the delay occurred because of YourCollege and produces sufficient proof of his claim. Then the contractor might be entitled for a compensation.
Likely outcome of a lawsuit: Time is of Essence” clause in the contract also entitles a contractor to a time extension. The contractor is protected from liquidated damage or actual damages for delay beyond the contractor’s control if the contractor can prove so.
The contractor’s affirmative claim for compensation for the delay will be controlled by other contract provisions also.
If the contractor claims that the delay may fall in the category of excusable but non-compensable delay if the weather was extraordinarily adverse, if there was a labor strike, or there was lack of sole source materials.
The court might appoint experts to assess if the delay was caused because of YourCollege. Owner-caused delays are also excusable (but may not be compensable, depending on contract terms, including design defects, change orders, suspension of work, and lack of permits, rights of way or access to the site or over inspection. Differing site conditions or impossibility can also result in excusable delays.
Hence the likely outcome of this case can be of two types: (1) If the contractor proves that the delay falls under the category of excusable delays then the contractor becomes entitled to the total sum as quoted in the revised contract which is $5,250,000. (2) If the delay does not fall into the category of excusable delays then the contractor will have to pay for the liquidated damages as determined by the court/expert committee appointed by the court to assess the damages.