Firm attorneys Polly Jessen, Adam Giuliano, Emily Eads, Brandon Rattiner and Diane Sung explore issues associated with consequential damages provisions in construction contracts and provide guidance to those drafting such contract in a recent edition of the Transportation Research Board’s NCHRP Legal Research Digest.

“Public entities negotiating transportation construction contracts must strike the right balance between protecting the public from risk and according counterparties the flexibility necessary to complete projects. Few contractual provisions exemplify this tension more than those dealing with consequential damages do. The public nature and cost of transportation construction projects creates a risk of large consequential damages awards, which has led to a proliferation of different contractual clauses and strategies to mitigate this risk. In a recent edition of the Transportation Research Board’s NCHRP Legal Research Digest. This legal research digest explores the issues associated

with consequential damages provisions in construction contracts, and it provides guidance to those drafting such contracts. Specifically, this digest discusses:

• How and what kind of consequential damages are and are not awarded in transportation contract disputes;
• Potential risk to the parties to public transportation contracts of large consequential damages awards;
• Use of consequential damages provisions in industry practice and model forms to limit exposure to consequential damages risks;
• Federal, state, and common law rules bearing on consequential damages in the public transportation contracting context;
• Guidance on drafting consequential damages provisions;
• Examples of consequential damages provisions in state department of transportation contracts; and
• Trends in consequential damages provisions.

It also includes a checklist to help contracting officials, attorneys, procurement officers, planners, engineers, agency ­financial officials, administrators, and staff involved in the construction process navigate the risks associated with consequential damages in public transportation contracts.”