two. The first is that the plaintiff's measure of damages as averred in the statement is improper. The other is that the plaintiff is not entitled to any damages for delay. Passing without deciding the question whether these propositions are such as may properly be raised in an affidavit of defense raising questions of law, we will consider each on its merits.
The first proposition raised by the defendant is that since Rae's contract itself provides in paragraph C54 for a specific method of measuring the damages in the event of the abandonment of the contract by the contractor, that method must be followed. The provision is that the city may complete the work and charge the expense thereof to the contractor or his surety. On the basis of this provision defendant urges that it is incumbent upon the city to complete the contract and definitely to ascertain the expense of completion before bringing suit. Since the present suit is upon the bond and not the contract, this contention is evidently based upon the theory that the former is a bond of indemnity against loss by reason of the nonperformance of the construction contract. If this were so, the defendant's position might be well taken. It is clear, however, that the bond upon which the present suit has been brought is one of guarantee and not merely one of indemnity against loss. Board of Education v. Maryland Casualty Co. (C.C.A.) 27 F.2d 20; Purdy v. Massey, 306 Pa. 288, 159 A. 545; Trainor Co. v. AEtna Casualty Co., 290 U.S. 47, 54 S. Ct. 1, 78 L. Ed. 162. As in the cases cited, so here the condition of the bond was performance of the contract and upon default by the contractor the surety was bound to complete the work. Having defaulted in this obligation its liability at once became fixed to compensate the city for the damages sustained by the latter. In these circumstances, if there is no contractual obligation on the owner to complete the work, damages are payable even though it is never completed. Wills v. Peace Creek Drainage District (C.C.A.) 4 F.2d 519. In such a case, damages must necessarily be based upon evidence as to what the completion of the work would reasonably cost. But where as here a contract to complete the work has been let on terms identical with those of the first contract except as to price, the measure of damages clearly is the difference between the original contract cost of the uncompleted work and the cost fixed in the later contract. Board of Education v. Maryland Casualty Co., supra. It follows that the measure of damages claimed by the city is proper, the defendant being entitled to credit for so much of the work included in Lombardi's contract as was actually performed by Rae. The conclusion we have reached is not affected by the fact that the contracts here involved contained unit instead of lumpsum prices. The units being ascertainable, the prices were readily reducible to a lumpsum basis, as the statement of claim discloses.
The remaining question is whether the city is entitled to additional damages for delay. It has apparently claimed them upon the basis of the penalty of $50 per day for delay contained in Rae's contract. We may admit that a stipulation of this kind may not be applied in respect of the full period of delayed construction, since some of the delay may well be due to acts of the owner or defaults of the second contractor and for these the defaulting contractor should not be held responsible. Shields v. Shields Construction Co., 81 N.J.Eq. 286, 86 A. 958. It does not follow, however, that the city is not entitled to any damages for delay. It has been held that such damages are recoverable. Prudence Co. v. Fidelity Co., 297 U.S. 198, 56 S. Ct. 387, 80 L. Ed. 581. The penalty stipulated for in the contract appears to be a reasonable liquidation by the parties of the damages suffered by the city for delay in completing the contract ( Malone v. Philadelphia, 147 Pa. 416, 23 A. 628), and we think that the city is entitled to claim damages at that rate for such delay as directly resulted from Rae's abandonment of the work. Just what portion of the delay was directly attributable to Rae's abandonment of the contract is, of course, a question of fact to be determined at the trial, but since the city secured a second contractor and surety who guaranteed to complete the work by July 1, 1935, four months after the completion date stipulated in Rae's contract, it would appear that defendant could not be held responsible for delay beyond that period. It would thus seem that the city's claim for damages for delay could not exceed $6,100.
The questions of law raised by the defendant are decided against it with leave to file a supplemental affidavit of defense within fifteen days.
© 1992-2004 VersusLaw Inc.