Question

10. Alaska Developers, a partnership owed by Mr. and Mrs. Kramer, contracted with Big Bear City to build additional housing to accommodate workers on the Trans-Alaska pipeline, the work to be completed by November 1. At the time the developer contracted with the city, commencement of construction on the pipeline was imminent, and the need for housing was great. The contract contained a liquidated damages clause stating that the developer would pay the city $200/day in liquidated damages for each day the project was not completed after November 1. However, shortly after the parties entered into the contract, the owners, the Kramers, credit rating was revised and it could not afford to get the financing for two more months, delaying the project. You can assume damages but do not worry about that issue here only answer the liability issue. a. What type of delay is this? b. Who is responsible to pay the damages?

Answer 1

The above delay is a NON-EXCUSABLE delay as the change is the developers’ credit rating is a controllable factor on their part. Financing delay owing to lowered credit rating could have been managed by the developersfor avoiding such delay. Thus, being non-excusable the delay is also COMPENSABE. The delay leads to a significant amount of time being extended in the construction where the build up was needed urgently as the pipeline construction was imminent. This makes the delay CRITICAL and prone to damages. Also, the agreement consists clause for compensation of liquidated damages at the rate of $200/day. Thus, it would be the contractors’ (Alaska Developers) liability to pay for the dmages.