Wise v. United States

Background

A private builder, Stannard (represented here by his Trustee in Bankruptcy), contracted with the United States in December 1904 to build two laboratory buildings for the Department of Agriculture in Washington, D.C., for $1,171,000. The written contract and specifications made time "of the essence" and set liquidated damages of $200 per day for delay not caused by the Government. The work finished 101 days late and the Government deducted $200 per day, a total of $20,200. The contractor sued to recover that sum. The Court of Claims dismissed the case, and the contractor appealed.

Reasoning

The core question was whether the $200 daily charge was a valid pre-estimate of loss or an unenforceable penalty. The Court explained that when parties fairly and clearly agree on a liquidated-damages amount, courts should enforce it if actual harm is uncertain and the figure is not extravagant. The Court noted that the parties said the sum was "computed, estimated, and agreed upon," that losses from delay would be hard to calculate, and that the amount was reasonable given the Government’s investment, rental or salary expenses, and disruption to laboratory operations. Because both buildings were delayed and the clause fit the contract’s terms, the Court affirmed the lower court’s judgment and enforced the deduction.

Real world impact

The decision confirms that clear, negotiated liquidated-damages clauses in government construction contracts will be enforced when damages are uncertain and the amount is not excessive. Contractors who agree to such clauses will have limited ability to recover withheld sums for comparable delays, and governments can rely on these clauses to promote timely performance.