Liquidated Damages Clause Pennsylvania
In Pennsylvania, liquidated damage clauses are universally accepted as a necessary part of the law governing construction contracts. Sutter Corp. v. Tri-Boro Mun. Auth., 338 Pa. Super. 217, 487 A.2d 933 (Pa. Super. 1985).
As such, parties to a contract may include a liquidated damages provision that ensures recovery in cases where computation of actual damages would be speculative. Pantuso Motors, Inc.; Brinich v. Jencka, 2000 PA Super 209, 757 A.2d 388 (Pa. Super. 2000).
These clauses are enforceable provided, at the time the parties enter into the contract, the sum agreed to is a reasonable approximation of the expected loss rather than an unlawful penalty. Brinich;
See also Restatement (Second) of Contracts, 356(1) (1981) ("Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss[;][a] term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty.")
As to the applicable burden of proof in a liquidated damages claim, the government has "the ultimate burden of persuasion as well the initial burden of going forward to show that the contract was not completed by the agreed contract completion date and that liquidated damages were due and owing." PCL Constr. Servs., Inc. v. United States, 53 Fed. Cl. 479, 484 (2002), aff'd, 96 Fed. Appx. 672 (Fed. Cir. 2004).
The government meets its initial burden by showing "the contract performance requirements were not substantially completed by the contract completion date and that the period for which the assessment was made was proper." Id.
Once the government satisfies its initial burden, the burden shifts to the contractor to show "any delays were excusable and that it should be relieved of all or part of the assessment." Id.
A party asserting liquidated damages were improperly assessed bears the burden of showing the extent of the excusable delay to which it is entitled. Id.
"Where one party to a contract is the cause of another's failure to perform, it cannot assert that failure against the other.
It is particularly well settled that a party may not retain liquidated damages for the amount of delay caused by its own actions." Dep't of Transp. v. W.P. Dickerson & Son, Inc., 42 Pa. Commw. 359, 400 A.2d 930, 933 (Pa. Cmwlth. 1979).
Also, in Department of Transportation v. Cumberland Construction Co., 90 Pa. Commw. 273, 494 A.2d 520 (Pa. Cmwlth. 1984), the Court stated PennDOT was not entitled to retain liquidated delay damages where a contractor's delay was occasioned by unusual site conditions and additional work ordered by PennDOT personnel.