## Facts

- The Utah Department of Transportation contracted with Fluor Ames Kraemer, LLC (FAK) under a design-build prime contract to construct the Legacy Parkway project.
- FAK furnished a public-works payment bond issued by Fireman’s Fund Insurance Co. and St. Paul Fire & Marine Insurance Co. as co-sureties.
- FAK subcontracted with Encon Utah, LLC (Encon) to manufacture, furnish, and install precast concrete bridge girders for $6,842,342.
- After an injunction partially halted the project, UDOT partially terminated the prime contract; FAK then issued Encon a notice of partial termination of the subcontract.
- Encon’s last subcontract work was hauling and installing 13 girders in March 2004, and Encon was paid in full for that work in May 2004.
- The subcontract contained a termination provision stating that, upon termination of this type, Encon could recover actual pre-termination costs, reasonable overhead and profit on those costs, and reasonable costs occasioned by the termination.
- Encon sought termination damages under the clause and also pursued recovery against the payment bond.

## Issues

1. Whether the subcontract’s termination provision allowed Encon to recover termination compensation based on actual incurred costs (with overhead and profit on those costs) and reasonable termination-occasioned costs, rather than broader expectancy or windfall damages.
2. Whether “claim preparation costs” were recoverable as termination-occasioned costs under the subcontract.
3. Whether prejudgment interest was available on termination damages, and if so, on what components.
4. Whether Encon’s payment-bond claim was timely under former Utah Code § 63-56-38(4), supporting an award of attorney fees tied to the bond claim.

## Decision

- The Utah Supreme Court largely affirmed the judgment for Encon on entitlement to termination damages under the subcontract’s termination provision.
- The court construed the clause as a cost-based remedy: actual pre-termination costs plus reasonable overhead and profit on those costs, plus reasonable costs caused by the termination.
- The court limited recovery of claim-preparation-type expenses, treating such items as outside (or only narrowly within) “costs occasioned by the termination.”
- The court upheld prejudgment interest to the extent the damages were readily calculable under Utah law.
- The court held Encon’s payment-bond claim was timely under former Utah Code § 63-56-38(4) and sustained attorney-fee recovery based on the bond claim.

## Legal Principles

- A construction subcontract termination clause triggered by an owner’s suspension or termination may be enforced as written to provide a cost-based termination remedy rather than lost-profit expectancy damages.
- “Actual costs of work performed” generally refers to costs actually incurred before termination; overhead and profit may be awarded only on the costs the clause authorizes as a base.
- Contract language allowing recovery of “costs occasioned by the termination” covers reasonable termination-caused project costs, but does not automatically include post-dispute claim prosecution or attorney-fee-like expenses.
- Prejudgment interest is proper under Utah law when damages are complete and calculable with mathematical accuracy at a determinable time; it may be denied for components that are discretionary or not objectively ascertainable.
- Compliance with statutory timing requirements for public-works payment-bond claims preserves the claimant’s right to proceed on the bond and may support statutory or contract-based fee shifting.

## Conclusion

The Utah Supreme Court treated the subcontract’s termination provision as a structured, cost-based remedy (actual incurred costs plus reasonable overhead, profit, and termination-caused costs), curtailed recovery of claim-preparation expenses, allowed prejudgment interest for objectively calculable amounts, and held the subcontractor’s payment-bond claim timely, supporting an attorney-fee award.


Encon Utah, LLC v. Fluor Ames Kraemer, LLC, 210 P.3d 263 (Utah 2009)