Is the contractor liable for damages due to delayed completion?

Question from neal, Is the contractor liable for damages due to delayed completion?

Answer from AI:

Issue

The primary issue is whether the contractor is liable for damages due to the delayed completion of the painting work, which resulted in Design Ltd losing a profitable contract with Events Ltd and incurring additional costs.

Rule

To determine liability, we need to consider the following legal principles and case law:

• Breach of Contract: A breach occurs when one party fails to fulfill their contractual obligations. In this case, the contractor was required to complete the work by 18th April.
• Damages for Breach: The general rule for damages is to put the injured party in the position they would have been in had the contract been performed as agreed. This is supported by Hadley v Baxendale (1854) 9 Exch. 341, which established that damages should be foreseeable and directly related to the breach.
• Consequential Loss: In Anglia Television Ltd v Reed [1972] 1 QB 60, it was held that a party can recover losses that were reasonably foreseeable at the time the contract was made.
• Mitigation of Loss: The injured party must take reasonable steps to mitigate their losses, as seen in Maritime National Fish Ltd. v Ocean Trawlers Ltd., [1935] AC 524.
• Liquidated Damages: If a contract specifies a penalty for late performance, such as £1,000 per day, this is generally enforceable if it represents a genuine pre-estimate of loss.

Application

Applying these rules to the facts:

1. Breach of Contract: The contractor failed to complete the work by the agreed date of 18th April, constituting a breach of contract.
2. Liquidated Damages: The contract specified a penalty of £1,000 per day for late completion. Since the work was completed ten days late, Design Ltd is entitled to claim £10,000 as liquidated damages.
3. Consequential Loss: Design Ltd lost a contract with Events Ltd worth £2,500 due to the delay. According to Hadley v Baxendale, these losses must be foreseeable. Given that the contractor was aware of the importance of the completion date, the loss of the Events Ltd contract could be considered foreseeable.
4. Mitigation of Loss: Design Ltd must demonstrate that they took reasonable steps to mitigate their losses. If they did not attempt to find an alternative contractor or reschedule the event, their claim for consequential losses might be reduced.

Conclusion

Based on the above analysis, the contractor is likely liable for the £10,000 in liquidated damages due to the ten-day delay. Additionally, Design Ltd may be able to claim the £2,500 loss from the Events Ltd contract if it can be shown that this loss was foreseeable and that they took reasonable steps to mitigate their losses.

However, this is a general analysis, and specific legal advice should be sought. Design Ltd and the contractor should consult with a legal professional to discuss the details of their case and obtain personalized advice.

For more information on breach of contract and damages, you can refer to the [UK Government’s guide on contract law](https://www.gov.uk/guidance/contract-law) and the [Hadley v Baxendale case summary](https://www.lawteacher.net/cases/hadley-v-baxendale.php).