Contractor Damages Calculations
In Hibachi Grill v. Arki Construction, Inc., Florida’s Third District Court of Appeal was faced with two important questions that arise in construction disputes:
1. Can an owner setoff the general contractor’s claims by amounts paid to subcontractors? and
2. What is the proper measure of damages for a contractor that obtains substantial completion.
Answer 1: The answer to question #1 is yes, where the contractor pleads that its damages include reductions due to the owners direct payments to subcontractors. Arki Construction filed an amended complaint alleging that its damages were “the total sum of $32,104.36, less whatever amounts paid directly by the [Owner] to other subcontractors.”
Arki filed a motion for summary judgment seeking the entire amount of the unpaid contract balance. The owner filed an affidavit in opposition detailing payments to project subcontractors in the amount of $14,810.80. Even though the owner’s affirmative defenses of set off for sums paid to subcontractors was stricken by the trial court, where the contractor pled that its damages should be reduced by amounts paid by the owner to subcontractors, it was reversible error for the trial court to enter judgment in favor of the contractor without providing a reduction in the damages for the amounts paid by the owner to subcontractors.
Answer 2: Where a contract is breached after substantial performance by the contractor, the measure of damages is the unpaid contract balance, and not the contractor’s lost profit.share