Michigan Court of Appeals Holds That Contractor Who Failed to Timely Seek a Time Extension Is Barred From Contesting Liquidated Damages

Abhe & Svboda, Inc. v. State of Michigan Department of Transportation, 2017 Mich. App. Lexis 1387 (August 29, 2017)

Contractor Abhe & Svboda, Inc. (“A&B”) entered into a contract with the Michigan Department of Transportation (“MDOT”) to clean and paint a portion of the Mackinac Bridge, with a contract completion date of October 30, 2009.  A&B missed the completion date by 644 days.  MDOT, therefore, imposed liquidated damages in the amount of $3,000 per day for each day by which completion was delayed.

In the trial court, A&B argued that MDOT’s assessment of liquidated damages was improper because a portion of the delay was caused by MDOT’s failure to approve a prerequisite to the work (scaffolding) and because site conditions were substantially worse than reasonably anticipated.

The trial court held that A&B waived its right to relief, because A&B never requested an extension of time as provided in the contract.  The contract provided that a contractor had 14 days “following the end of the delay” or “following the end of the calendar month in which the delay occurred” to make a request for extension of time, depending on whether the delay was weather-related or for any other reason.  Because A&B failed to make the appropriate request, the trial court granted judgment in favor of defendants.

On appeal, A&B argued that because defendants’ own delays prevented timely completion, the liquidated damages were improperly assessed, citing in particular Early v. Tussing, 182 Mich. 314, 327-330 (1914).  The Court of Appeals rejected this argument noting that the court in Early itself had noted that its holding may have been different in a situation where the party imposing the liquidated damages had the power to extend the time for completion.  The Court of Appeals concluded that if a contract, like the one here, permits an extension of time upon request, but no such request was made, the liquidated damages remain enforceable.

The Court of Appeals noted that the only specific delay cited by A&B was defendants’ dilatory approval of the scaffolding.  A&B argued that it made a proper request for an extension for this delay on October 14, 2010 and November 2, 2011.  Because the contract completion date was October 30, 2009, the Court of Appeals held that these requests were untimely.

Accordingly, because A&B failed to make a timely request for a time extension due to delay, it could not avoid the liquidated damages.

To view the full text of the court’s decision, courtesy of Lexis®, click here.

Michelle Beth Rosenberg

 

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