## Facts

- A public facility board contracted with a contractor to build and complete a sewer system for a fixed price, with a specified completion date and a $400-per-day liquidated-damages clause for late completion.
- The board agreed to obtain necessary easements, but disputes with two landowners were not resolved until late in the project and affected completion and operability.
- Construction was also delayed by wet weather and the project engineer ceasing on-site supervision after a payment dispute with the county.
- The board granted at least one extension to a later completion date, but the contractor did not finish by that date; the parties disputed whether an additional extension was agreed to.
- By fall 2005, the contractor had installed and tested sewer lines and installed pump stations and force-main pipes, but the system was still not operational.
- After more than a year beyond the original completion date, the contractor left the project with the system incomplete; the board refused to pay the full final pay request.

## Issues

1. Whether the contractor substantially performed the construction contract and therefore could recover the contract price.
2. If there was no substantial performance, whether the contractor could still recover compensation for the value of work completed and retained by the owner.
3. Whether the owner was entitled to liquidated damages for late completion under the contract.
4. Whether the trial court applied liquidated damages for the correct time period.

## Decision

- Affirmed the finding that the contractor did not substantially perform because the system remained non-operational and material work remained incomplete or defective.
- Held that despite lack of substantial performance, the contractor was entitled to appropriate compensation for the value of work and materials accepted and retained by the owner (restitution/quantum meruit).
- Affirmed the award of liquidated damages to the owner under the contract’s $400-per-day clause.
- Rejected the owner’s cross-appeal seeking a longer liquidated-damages period, concluding the trial court’s allocation of delay responsibility and the selected period were not clearly erroneous.
- Remanded for determination/adjustment of the amount of compensation owed to the contractor consistent with restitution principles and offsets.

## Legal Principles

- Substantial performance in construction contracts requires performance sufficiently complete that remaining defects or omissions are not material; a non-operational public-works system may support a finding of no substantial performance.
- A contractor who fails to substantially perform may still recover in restitution/quantum meruit for the reasonable value of work and materials that the owner has accepted and retained, subject to appropriate offsets.
- A liquidated-damages clause is enforceable when it functions as a reasonable forecast of probable damages from delay rather than as a penalty; when enforceable, courts apply it to the factfinder-determined period of delay attributable to the contractor.
- On appellate review of a bench trial, factual findings on performance, causation of delay, and the proper liquidated-damages period are upheld unless clearly erroneous.

## Conclusion

The court upheld the trial court’s determination that the contractor did not substantially perform and that the owner was entitled to liquidated damages for delay, but it also held that the contractor could recover restitution for the value of work the owner retained, with the amount to be determined on remand and reduced by proper offsets.


Roberts Contracting Co. v. Valentine-Wooten Rd. Pub. Facility Bd., 2009 Ark. App. 437, 320 S.W.3d 1 (Ark. Ct. App. 2009)