Consequential Damages Provisions in Construction Contracts: Legal Issues (2022)

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Background State highway departments and transportation agen- cies have a continuing need to keep abreast of operat- ing practices and legal elements of specic problems in highway law. e NCHRP Legal Research Digest and the Selected Studies in Transportation Law (SSTL) series are intended to keep departments up-to-date on laws that will aect their operations. Foreword Public entities negotiating transportation construction contracts must strike the right balance between pro- tecting the public from risk and aording counter- parties the exibility necessary to complete projects. Few contractual provisions exemplify this tension more than those dealing with consequential damages do. e public nature and cost of transportation construction projects creates a risk of large consequential damages awards, which has led to a proliferation of dierent contractual clauses and strategies to mitigate this risk. is legal research digest explores the issues associated with consequential damages provisions in construction contracts, and it provides guidance to those draing such contracts. e digest specically 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 indus- try practice and model forms to limit exposure to consequential damages risks; • Federal, state, and common law rules bearing on consequential damages in the public transporta- tion contracting context; • Guidance on draing consequential damages provisions; • Examples of consequential damages provisions in state department of transportation contracts; and • Trends in consequential damages provisions. is legal digest includes a checklist to help contract- ing ocials, attorneys, procurement ocers, planners, engineers, agency nancial ocials, administrators, and sta involved in the construction process navigate the risks associated with consequential damages in public transportation contracts. Consequential Damages Provisions in Construction Contracts: Legal Issues This digest was prepared under NCHRP Project 20-06, “Legal Problems Arising Out of Highway Programs,” for which the Transportation Research Board (TRB) is the agency coordinating the research. Under Topic 25-05, Polly Jessen, Riley Cutner-Orrantia, Brandon Rattiner, and Diane Sung, Kaplan Kirsch & Rockwell LLP, Denver, CO; and Adam Giuliano and Emily Eads, Kaplan Kirsch & Rockwell LLP, New York, NY, prepared this digest. The opinions and conclusions expressed or implied in this digest are those of the researchers who performed the research and are not necessarily those of the Transportation Research Board; the National Academies of Sciences, Engineering, and Medicine; or the program sponsors. The responsible program officer is Gwen Chisholm Smith. DECEMBER 2022 NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM NCHRPLRD 88 LEGAL RESEARCH DIGEST