Contractor Liable For Liquidated Damages Because It Failed To Properly Seek Extension Of Time

The Fifth Appellate District of the California Court of Appeal recently issued an opinion that has important implications to all stakeholders in California's construction industry. In Greg Opinski Construction, Inc. v. City of Oakdale, Nos. F060219, F060727, 2011, 2011 WL 4625304 (Cal. Ct. App. Oct. 6, 2011), the California Court of Appeal held that where a contract contains specific requirements for obtaining an extension of time, and a contractor fails to comply with those requirements, it is barred from later contesting its liability for any project delays.

The Greg Opinski opinion has significant implications for the California construction industry. Principally, the opinion means that contractors must timely submit claims for alleged owner-caused delays in compliance with the terms of their contracts, or else risk suffering the fate of the general contractor in this case and be barred from contesting liability for delayed completion. The opinion also means, as may have been the case here, that a contractor may ultimately be held liable for liquidated damages stemming from owner-caused delays. This is problematic for a number of reasons, primarily because strict compliance with these provisions is often quite difficult and is rarely enforced by the parties. It remains to be seen whether the litigants will appeal to the California Supreme Court, or what the true impact of Greg Opinski will be, but for now it seems like an opinion likely to have a wide ranging impact for years to come.

Case Discussion

In Greg Opinski, a city entered into a contract with a general contractor for the construction of a building project. The contract provided for completion of the project within 300 days and provided for liquidated damages of $250 for each day of delay. The project was completed seven months late. The general contractor brought suit against the city for the unpaid balance of the contract and for $24,436 "in excess of the contract price for proposed change orders the city had refused to approve . . . ." The city filed a cross-complaint against the contractor seeking "$54,000 in liquidated damages for lateness" and "$10,000 for defective conditions . . . ."

The General Conditions of the contract provided that the contract price and time for performance could only be changed by way of a change order. The contract provided two means to obtain a change order. First, a change order could be executed by mutual agreement of the parties. Second, a...