State Agency Entitled to Liquidated Damages Even Though Agency Caused Delay

Southeast Alaska Constr. Co., Inc. v. Dept. of Transp. & Public Facilities, 791 P.2d 339 (Alaska 1990)

This case concerned a public construction project that suffered from design and material deficiencies.  When the contractor failed to complete the project, the agency sued and won on a claim for liquidated damages.  The contractor appealed, arguing that because the agency was responsible for the delay, it should not be entitled to damages.

The Supreme Court of Alaska affirmed.  A liquidated damages provision is enforceable if:  (1) the liquidated amount is a reasonable forecast of compensation for the harm caused by the breach, and (2) the harm caused is difficult to assess accurately.  The court noted that even if the agency were responsible for deficiencies in the design, when the contractor agreed to an extension of the project deadline, it was bound by that extension.