The First District Court of Appeal, in Keystone Airpark Authority v. Pipeline Contractors, Inc., 43 Fla. L. Weekly D2601d (Fla. 1st DCA Nov. 27, 2018), certified the following question of great public importance: Where a contract expressly requires a party to supervise construction work and to determine the suitability of materials used in the construction, but the party fails to properly supervise and inferior materials are used, are the costs to repair damage caused by the use of the improper materials general, special, or consequential damages?”

The Airpark contracted with a contractor to construct airplane hangers and taxiways.  It separately contracted with Defendant Passero to provide engineering services, including inspection and material testing.  The Airpark alleged that the contractor used substandard material, which Passero failed to detect, causing the hanger slabs and taxiways to prematurely deteriorate.  The Airpark sued Passero for breach of contract and negligence.  It sought to recover the cost to remove, repair, and replace the hangers, taxiways, and underlying subgrade.

Passero moved for summary judgment, arguing the damages did not directly result from Passero’s alleged failure to supervise.  Instead, Passero argue the damages were consequential, which were excluded by a provision of the parties’ contract.  The trial court agreed and entered partial summary final judgment in favor of Passero.

On appeal, the Airpark argued that the cost of repair constituted general, not consequential damages, because those damages were a foreseeable result of Passero’s failure to properly supervise construction.  It argued the damages were general and did not result from special circumstances about which it would have been required to give Passero actual notice.  The appellate court reviewed the definition of general, special, and consequential damages and how the question of foreseeability affects the nature of the damages incurred in this case.

General damages naturally and necessarily flow or result from the injuries alleged.  They arise out of the usual course of events from the breach of contract.  They are direct, natural, logical and necessary consequences of the injury.  Special damages are not likely to occur in the usual course of events but are those particular to the party against whom the breach was committed and those which would not be expected to occur regularly to others in similar circumstances.  General damages are awarded only if the injury was foreseeable, whereas special damages are awarded only if actual notice was given regarding the possibility of injury.  On the other hand, “[c]onsequential damages do not arise within the scope of the immediate buyer-seller transaction, but rather stem from losses incurred by the non-breaching party in its dealings, often with third parties, which were a proximate result of the breach, and which were reasonably foreseeable by the breaching party at the time of contracting.”

The appellate court agreed with Airpark that the damages were not special.  They were not particular to the Airpark and did not require the giving of notice to Passero.  These “damages would be expected to occur to other parties in similar circumstances.”  However, the cost of repair did not constitute general damages either because they “were not the direct or necessary consequence of Passero’s alleged failure to supervise.”  The contractor could have completed the job even absent supervision.  “Thus, the need for repair did not arise within the scope of the immediate transaction between Passero and the Airpark.”  The need arose from the loss incurred by the Airpark and its dealings with the contractor, a third party.  They were consequential damages of the cost to repair or replace property following deficient inspections, not general or direct damages.   While the appellate court found the damages to be consequential, it acknowledged that “the contract between the Airpark and Passero expressly required Passero to supervise the construction work and to determine the suitability of the materials brought onto the site.”

Based on the contract language, and because no case law in Florida was directly on point involving damages stemming from the failure to supervise and inspect construction work, the First District Court of appeal certified the above question as one of great public importance.  An ultimate resolution by the Supreme Court of Florida will impact how contractual provisions in construction-related contacts concerning supervision fits within established case law concerning the recoverability of general, specific, and consequential damages.

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