Lump sum compensationLiquid damages can be difficult to calculate because they are intangible or difficult to define. Lump sum damages in a contract may be paid in the form of a lump sum or on the basis of a delay period. Two examples of this are: In construction cases, there are three general categories of contractual damage: 1) damage due to defective workmanship, 2) time-related damage and 3) damage due to non-performance. This article provides an overview of the cases and basic legal principles that apply to these three types of construction contract claims. I. Principles of Contract Law In construction contracts, damages are awarded in accordance with traditional principles of common law contract law. At common law, a contract is simply a promise or set of promises that the law will enforce, or at least somehow recognize. Since a promise, its own solemn word, is at the heart of the treaty, it seems logical that the obligatory fulfillment of a promise – forcing the promisors to keep their words – is a primary objective of the common law. On the contrary, common law remedies are not directed against the coercion of promises to prevent violations, but are aimed at resolving promises. This objective is in line with the theory of the market economy. According to free market theory, negotiated contracts distribute resources in the most socially efficient manner; The premise of the theory is that any good or service must be consumed by the person who appreciates it most, and that each factor of production must be used in such a way as to produce the most appreciated production. Therefore, voluntary contracts, obtained through negotiations in which individuals exchange their assets with others who value wealth higher, promote the social goal of economic efficiency.

Since economic theory assumes rationality, without error or coercion, the parties to a contract emphasize the performance of the other party that is greater than their respective expected performance costs. Logically, it follows that in cases where a party first makes a value miscalculation or undergoes a change in circumstances, breaches of contract can certainly promote benefits. Therefore, the ultimate effect of common law contractual remedies is to induce a party to breach of contract that hesitates, if, but only if, the party benefits sufficiently from the breach to compensate the injured party for its losses while retaining some of the benefits. Since the alleviation of broken promises is the primary objective of contract law, the equitable use of a particular service is not preferable. Orders for certain services, i.e. a court order that effectively compels a party to perform the service specified in the contract, are particularly disadvantaged in construction law, as the performance of work contracts would require the court to monitor contract performance and set standards for the evaluation of contract performance. Therefore, the common law`s preferred remedies for breach of contract are “substitution” in nature and offer the award of damages as a substitute for the fulfillment of the actual promise. Since the objective is to grant relief rather than force enforcement, the imposition of criminal sanctions and punitive damages is incompatible with the theory of the free market economy and is therefore not preferable. Although the common law is reluctant to order actual performance, it promotes confidence in promises by protecting the expectations of the aggrieved parties when signing the contract by placing them in as good a position as it would have been when the contract was performed.

This interest to be protected is called the “interest of waiting” and is intended to give the injured party the “advantage of the agreement”. The expected interest is not based on the subjective optimism or aspirations of a party at the time of the conclusion of the contract, but on the real value that the contract would have had if it had been fulfilled in accordance with its conditions. Contractual harm is limited by two fundamental principles: foreseeability and reasonableness. The most important rule of contract law appeared in the famous English case Hadley v. Baxendale, which states that the measure of damages for breach of contract is either damages that can reasonably and reasonably be considered to be a natural result of the breach, or that were reasonably in the considerations of the parties at the time of the conclusion of the contract. To be reasonable, compensation must be subject to a well-defined standard, such as repair costs, market value, proven experience, rental value, loss of use, loss of profit or direct inferences arising from known circumstances, if supported by evidence […].