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Martell Construction Co., Inc. v. Eagle Fencing Co.

A-4247-03T3 (N.J. Super. App. Div. 2005) (Unpublished)

CONTRACTORS; DAMAGES—A court can reasonably determine that damages due to delay in a governmental construction contract should be limited to twenty percent of the contract value.

A construction company won a State contract to renovate a building at a detention facility. Thereafter, it subcontracted for a fence company to erect a fence. Because of “changes by the State,” the fence company could not begin installing the fence until” after the date the “project was set to begin. Shortly thereafter, the construction company sued both the fence company and the State for additional compensation for both itself and the fence company. The fence company counterclaimed for unpaid fees in excess of costs and delays.

Although the construction company settled its claims with the State, its claims against the fence company went to trial and the lower court awarded damages to the fence company on the unpaid contract price and an additional amount due to delay, which the lower court “limited to twenty percent of the contract price. The Court relied on N.J.A.C. 5:30-11.9 as a model to determine the reasonable value of the fence company’s damages for the delay and change orders. The fence company appealed the award of damages due to delay, arguing that the lower court had no basis for ruling that the damages due it were limited to twenty percent of the contract value.

The Appellate Division upheld the lower court’s damages award, finding that there was sufficient credible evidence on the record to support the decision “in light of [the fence company’s] own estimation of additional damages ... as set forth in the amendment to the contract between the parties.” Additionally, the Court found that the lower court did not conclude that N.J.A.C. 5:30-11.9 was applicable to this matter, but merely used the regulation as a guide in light of the fence company’s own estimation of additional damages, as set forth in the amendment to the contract between the parties. The Court also found sufficient evidence that the damages the fence company had requested “were patently unreasonable” and that the sum the lower court awarded was reasonable and supported by sufficient credible evidence in the record.

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