Abel Const. Co. v. School Dist. of Seward, Seward County

• Decision Date: 17 March 1972
• Docket Number: No. 38075,38075
• Citation: 188 Neb. 166,195 N.W.2d 744
• Parties: ABEL CONSTRUCTION COMPANY, a Corporation, Appellant, v. SCHOOL DISTRICT OF SEWARD, in the COUNTY OF SEWARD, in the State of Nebraska, a Corporation, Appellee.
• Court: Nebraska Supreme Court

Page 744

195 N.W.2d 744

188 Neb. 166

ABEL CONSTRUCTION COMPANY, a Corporation, Appellant, v. SCHOOL DISTRICT OF SEWARD, in the COUNTY OF SEWARD, in the State of Nebraska, a Corporation, Appellee.

No. 38075.

Supreme Court of Nebraska.

March 17, 1972.

Syllabus by the Court

1. As a general rule, the question of whether a sum mentioned in a contract is to be considered as liquidated damages or as a penalty is a question of law, dependent on the construction of the contract by the court.

2. If the damages arising from a breach of the contract are difficult of ascertainment or admeasurement, and if the stipulated amount is not disproportionate to the amount of damages that may be reasonably anticipated from the breach, it will usually be regarded as a provision for liquidated damages.

3. Liquidated damages in a fixed sum for each day's delay in performing a construction contract, which in effect grades the damages according to the extent of the breach, and where the effect of the delay is difficult to estimate and the daily amounts are not clearly unreasonable are not penal.

4. Provisions in construction contracts providing that requests for additional time, necessitated by cause beyond the contractor's control, to complete the contract must be in writing are generally binding.

5. There must be evidence to support a finding that the inaction of certain parties for whose actions the owner was allegedly responsible was in fact the cause of the delay in completion of a construction contract.

6. Apparent authority is the power to affect the legal relations of another person by transactions with third persons, professedly as agent for the other, arising from and in accordance with the other's manifestations to such third persons.

7. The engineer's authority under terms of the construction contract to observe inspect, suspend, or reject work, or to make decisions in connection with technical specifications does not extend to waiving general contractual requirements relating to written request for time extensions and waiver of liquidated damages.

James W. Hewitt, Lincoln, for appellant.

Blevens, Bartu & Blevens, Seward, for appellee.

Heard before WHITE, C.J., and SPENCER, BOSLAUGH, SMITH, McCOWN, NEWTON and CLINTON, JJ.

CLINTON, Justice.

This is an action by Abel Construction Company, plaintiff, to recover from the defendant, School District of Seward, $5,175 alleged to be the balance owed upon a contract for the construction of an athletic track with a rubber asphalt resilient surface and other improvements at the Seward high school. The contract provided for liquidated damages of $75 for each day completion of the construction extended beyond the specified 60-calendar day 'contract period.' The defendant had withheld the liquidated damages for a claimed completion delay of 69 days. The trial judge determined as a matter of law that since the plaintiff had failed to request in writing an extension of the contract period as provided for in the construction contract the only question to be decided was the extent of the delay, and he therefore submitted to the jury the question of whether the contract was completed September 1, 1967, or September 8, 1967. The jury returned a verdict for the plaintiff in the amount of $525. The plaintiff appealed. We affirm the verdict and the judgment.

The plaintiff in its petition pled the contract by the incorporation of a copy thereof, admitted it had not completed the construction within the time provided in the contract, and alleged that the work was completed September 1, 1967, which was 60 days after the stipulated contractual completion date. It alleged that the delay was excusable because: (a) Rain during the period May 27, 1967, to July 3, 1967, was so far in excess of normal and in such quantity that construction could not take place during that period. (b) The defendant was responsible for a portion of the delay because a testing laboratory hired by the defendant did not complete determination of the 'leveling mix' and the 'rubber mix' and furnish the same to the plaintiff until June 20 and 23, 1967. (c) The rubber manufacturer's representative was required to be present at the laying of the resilient layer and through no fault of the plaintiff he was not able to be present until July 24, 1967.

The plaintiff further pled that the contractual provision for liquidated damages was void because it constituted a penalty and alleged that the defendant suffered no actual damage because of the delay.

The defendant in its answer pled specifically various provisions of the contract upon which it relied and to which we will refer in this opinion as required, including the failure of the plaintiff to request an extension of time in accordance with contract provisions. In an amended reply filed on the day trial began plaintiff alleged an estoppel to rely upon this contract provision because employee of the defendant's engineer, one Charles Kemery, had told the plaintiff 'not to worry about liquidated damages, as time lost would be adjusted by' the engineer.

The principal issues on appeal as raised by the assignments of error are: (1) Is the contract provision for liquidated damages void? (2) The effect, as related to the matters pled in excuse, of the contract provision requiring that the contractor request in writing extensions of the 'contract period' and the effect thereon of the statement of Kemery. All of which of course reaches the question of the propriety of the partial direction of the verdict by the trial court.

We first discuss the validity of the provisions for liquidated damages. The contract provided: 'Work shall be commenced within 10 days from the date of the written Notice to Proceed and shall be completed within sixty (60) calendar days after the date of the Notice to Proceed. . . . Liquidated Damages. As time is an essential element of the contract, all work shall be completed within the contract period. For each calendar day that any work remains uncompleted after the end of the contract period, the amount of Seventy Five Dollars ($75.00) per calendar day will be assessed, not as a penalty, but as a predetermined and agreed amount to be used to pay, in part, any additional engineering expenses incurred by the Owner after the end of the contract period.'

At the trial evidence was adduced by defendant to show that: Because of the delay the defendant incurred additional engineering expenses of $1,137.16; it incurred in unascertainable amounts additional expense in moving bleachers which would have been avoided had the work been completed in time so that the movement could have been made with regular employees; it was unable to use for a period of time some associated athletic facilities; there was expense and inconvenience in protecting the work while it cured which would have been avoided; and there were other items of inconvenience to the school and public to which no monetary valuation could be affixed. The total contract price was $80,896.98.

This court has had occasion previously to consider the question as to whether a liquidated damage provision similar to that here is valid. In Parsons Constr. Co. v. Metropolitan Utilities Dist., 170 Neb. 709, 104 N.W.2d 272, the court had before it such a provision calling for liquidated damages of $150 per day. We there said: 'In the case of Stanford Motor Co. v. Westman, 151 Neb. 850, 39 N.W.2d 841, 846, this court held: 'As a general rule, the question of whether a sum mentioned in a contract is to be considered as liquidated damages or as a penalty is a question of law, dependent on the construction of the contract by the court.' The court cited 15 Am.Jur., Damages, § 246, p. 678, as follows: 'In such cases the court must find out whether the payment stipulated is in truth liquidated damages or a penalty. The question whether it is the one or the other is a question of law and one quite independent of the agreement of the parties to call it the one or the other.' The court further said: 'We said in Gustin & Co. v. Nebraska Building & Investment Co., 110 Neb. 241, 193 N.W. 269: '. . . where the damages are uncertain, and not readily capable of exact ascertainment by any known rule, and the parties surveyed the whole situation at the time of contract, and agreed upon the amount of damages, in case of a breach in the contract to construct a building by a certain time, such sum, in case of a breach, is the true measure of recovery and is liquidated damages and not a penalty. '' The court further held: 'If the damages arising from a breach of the contract are difficult of ascertainment or admeasurement, and if the stipulated amount is not disproportionate to the amount of damages that may be reasonably anticipated form the breach, it will usually be regarded as a provision for liquidated damages.' See, also, Sofio v. Glissmann, 156 Neb. 610, 57 N.W.2d 176; Edgar v. Anthes, 109 Neb. 546, 191 N.W. 682.'

At 5 Williston on Contracts (3d Ed.), S. 785, p. 733, we find the following: 'It is commonly provided in building...