Construction Disputes & The Doctrine of Substantial Performance

By: Dan Pascale, Esq.

Offices located in Delray Beach and Coral Gables, FL

As the South Florida real estate market continues to heat up, construction disputes are once again becoming a common occurrence in Miami-Dade, Broward and Palm Beach County.

The Doctrine of Substantial Performance

While a party’s legal rights in a construction dispute are governed by the operative contract documents, they are also governed by the doctrine of substantial performance or substantial completion.  Florida courts have defined substantial performance as that performance of a contract which, while not full performance, is so nearly equivalent to what was bargained for that it would be unreasonable to deny the contractor the full contract price subject to the client’s right to recover whatever damages they may have suffered because of the contractor’s failure to render full performance, i.e. complete the construction job.

According to Florida law, under the doctrine of substantial performance, the contractor has the right to recover the contract price from the client; however, the client also has the right to recover any damages caused by the contractor’s failure to render full performance.  Sometimes, the offset damages that the client is entitled to because construction was not completed end up exceeding the contract price that the contractor is entitled to.

Calculating Damages for the Breach of a Construction Contract

To measure damages in a breach of construction contract case, the Florida Supreme Court has held that the aggrieved party should be given enough money in compensatory damages to restore them to the condition that they would have been in if the contract was fully performed by the contractor as agreed.  The amount of money damages awarded to the injured party are usually calculated by giving the injured party a sum of money sufficient to produce the physical product contracted for or by giving him or her the exchange value that the product would have had if it had been constructed.

Litigation, Arbitration and Mediation of Construction Disputes

With the number foreclosures in Florida continuing to dominate the court system and the inherent complexity of many construction disputes, it is common for construction litigation to take several years before a trial is set.  As a result, arbitration and mediation have become increasingly common alternative dispute resolution techniques in construction disputes.

In the litigation context, mediation is frequently ordered by the trial court before the construction case is set for trial.  Mediation can be beneficial to all of the parties by providing certainty to the parties and reducing attorneys’ fees and other trial costs such as expert witness fees.  While a party may feel that they have a rock solid case, jury trials by their very nature are never a slam-dunk even in the most certain of cases.

Arbitration, as opposed to litigation or mediation, is a contractual right set forth in the governing construction contract.  Arbitration is a private mechanism that takes place outside of the court system and thus does not involve a judge or jury. Rather, arbitration involves an arbitrator or panel of arbitrators depending on the specific arbitration clause at issue. Unless all of the parties to a construction contract containing an arbitration clause agree otherwise, the parties must arbitrate their dispute as opposed to litigating the dispute in court.  One of the major differences between arbitration and litigation is the amount of time and money that it takes to resolve the dispute, with arbitration generally taking less time to case resolution and therefore costing less money.

If you have questions and are looking for answers to legal issues in Miami-Dade, Broward or Palm Beach County, contact Jordan + Pascale, P.L. at 305-501-2836 or visit us at www.JordanPascale.com.