The purpose of damages is to restore an injured party to the same position that he would have been in had the other party not breached the contract. The concept of “first cost” has been employed to assure that the non-breaching party is not placed, because of the breach, in a better position than which he would have been in had the contract been performed. The case of School Board of Broward County v. Pierce Goodwin Alexander & Linville , 2014 WL 1031461 (Fla.4th DCA 2014), addressed the application of the “first cost” defense.
In School Board of Broward County v. Pierce Goodwin Alexander & Linville, the School Board entered into a contract (“contract”) with an architectural firm (the “architect”) to perform design services for the renovation of a high school. After construction was completed, the school board sued the architect, contending that numerous “change order items” (“COIs”) constituted a breach of the contract to provide design services. The COIs were generated by the architect due to changes in the initial design plans to meet building code requirements after construction commenced. The architect admitted liability for almost all of the COIs, and the jury awarded damages for these COIs. Following the award of damages, the architect filed a motion for remittitur, which asked the circuit court to reduce the amount of damages awarded to the School Board. The architect contended that the jury awarded the full amount of COIs without a reduction for “first costs.” The circuit court agreed and reduced the amount of damages awarded to the school board for COIs 11, 19, 46, 56, 57, 73 and 93. The school board appealed arguing that the circuit court erred in reducing the damages as to these COIs.
The school board argued on appeal that the jury award was not so excessive as to shock the judicial conscience, it was the jury’s function to weigh conflicting evidence, the jury had a right to disregard expert testimony if it felt it was not credible, and the school board presented competent evidence to support a determination that it was entitled to the full amount that the school board paid for each COI.
The appellate court agreed with the school board as to COIs 11 and 19, and disagreed with the school board as to COIs 46, 56, 57, 73 and 93. The appellate court concluded that damages collected by the school board for the COIs should not include costs for construction that the school board would have incurred if the initial design plans matched the final design plans (i.e. “first costs”). For example, as explained by the appellate court, if a design professional negligently designed a 1000 square foot drain field, and it was subsequently determined that a 1200 square foot drain field was required, the owner should pay for the additional 200 square feet because the additional feet were necessary for the owner’s need to dispose the sewage produced. However, if installing the additional 200SF out of sequence or after the original 1000 feet were installed cost more than it would have cost if the additional 200 feet were installed during the original construction, the design professional would be liable for the difference in cost.
The court held that the purpose of damages is to restore an injured party to the same position that it would have been in had the other party not breached the contract. If there had been no change between the initial plans drawn for bidding by contractors and the final construction plans, the school board would have been solely responsible for paying all construction expenses incurred for the renovation.
As to COIs 46, 56, 57, 73, and 93, the appellate court ruled that the jury ignored the evidence in reaching a verdict or misconceived the merits of the case relating to the amounts of damages, and reduced the damages as to these COIs based on the “first cost”. As to COIs 11 and 19, the appellate court concluded that because there was competent, substantial evidence supporting both sides of whether “first cost” applied to COIs 11 and 19, it was proper for the jury to decide the amount it awarded as to COIs 11 and 19. Therefore, the Court affirmed the circuit court’s judgment for damages as to COIs 46, 56, 57, 73, and 93, and reversed as to COIs 11 and 19.
This case demonstrates that contract damages are generally based on the injured party’s expectation interest and are intended to give the injured party the benefit of his bargain by awarding it a sum of money that will put it in as a good a position as it would have been in had the contract been performed.
About the Author: Alexander S. Beck is an associate with Stearns, Roberts & Guttentag, LLC. Mr. Beck in construction law including construction lien claims, payment and performance bond claims, bid protests, construction contract preparation, and construction and design defect claims He can be reached for consultation at [email protected].