Several editions ago, we published an article relating to the Boone Coleman v. Village of Piketon case, which struck down a $278,000 liquidated damages award for construction delays because the amount was disproportionately high compared to the original contract value and amounted to a penalty. Soon after that newsletter, we wrote about the Kent State University-Geno Ford case, which affirmed a $1.2 million liquidated damages award for Ford’s breach of his coaching contract, even though the award was four-times the amount of the annual contract value.
A few months ago, the Ohio Supreme Court heard an appeal over the Boone Coleman case, overturned the decision, and held that the $278,000 award was NOT disproportionately high compared to the $683,000 contract value. As a brief recap, Boone Coleman was a construction contractor on a public improvement project for the Village of Piketon, Ohio. The construction contract included a liquidated damages provision of $700 for every day that Boone Coleman failed to meet the completion date. The contractor did not complete the work on time, and completion was delayed by 397 days. The trial court awarded Piketon the entire $277,900 in liquidated damages sought by the Village.
Again, the Appeals Court reversed the trial court’s decision because the damages amount was disproportionately high compared to the original contract value. The Supreme Court, however, found that the appellate court’s focus on the total liquidated damages amount against the contract value, as opposed to the per diem amount of the penalty, was improper. Since other Ohio appellate districts have upheld per‑day liquidated damages amounts greater than $700, the Court held that the Village’s per‑day amount and, thus the entire $277,900 award, was enforceable.
While the Boone Coleman case can be said to be a public construction case, the lesson here is that liquidated damages provisions are generally enforceable. Even if the delays or breaches in performance translate into a liquidated damages award for an amount even greater than the contract value, Ohio courts may still enforce the award. So do not take liquidated damages clauses lightly. If your business runs into “LD” provisions with any regularity, give us a call to ensure you are managing your risk.