Equitable Estoppel by Conduct and Silence Precluded Liquidated Damages

Retail owner and contractor had completed nine projects in two states. Most projects were completed beyond the original completion date, but no liquidated damages had been assessed.

The current dispute concerned construction of five stores in Maine. The same contract form was used for each project; indeed, it was the same form that had been used for projects in the other states.

The trial court had found that none of the five projects were completed on time, for reasons that included weather delays and owner-caused delays. In each instance, the contractor notified the owner of delays and requested time extensions. The trial court also found that the owner had frequently failed to respond to the contractor’s notices and requests. At times, an owner rep indicated that the time extension requests would be dealt with after the projects were complete. And on some projects, the owner had issued change orders for extra work even after the original completion date.

The contractor believed the owner had agreed to time extensions, based on this history of communications, exchanges and (on the critical issue of completion date) silence. As a result, the contractor didn’t insist on signed change orders for time extensions.

The owner stopped making payments on all five projects, and then notified the contractor that it was withholding money for liquidated damages per each contract.

The trial court found that the owner “had waived and was equitably estopped from asserting” its liquidated damages claims. The owner challenged this decision on appeal. It argued that equitable estoppel would not apply unless it had explicitly told the contractor that LDs would not be assessed. (No one suggested there had been any explicit statement of the sort.)

The Maine Supreme Judicial Court noted that the trial court’s decision, supporting equitable estoppel, “was based on a combination of all three forms of misrepresentations – statements, conduct, and silence.” The court held that the owner’s conduct was misleading, and that its silence on this critical issue was misleading. Those actions could support a finding of equitable estoppel. Thus, there was no requirement of any affirmative statement by the owner, in order to apply the doctrine of equitable estoppel and bar LDs.

The case is Fortney & Weygandt, Inc. v. Lewiston DMEP IX, LLC, 2019 ME 175, 2019 Me. LEXIS 181 (Dec. 30, 2019).