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Liquidation Agreement Construction

The Second Division`s decision of March 2018 stated that a valid and enforceable liquidation agreement was necessary: since lump sum damages are not a penalty, it must be based on a true calculation of damages where they have been fixed. If they are not genuine, they may be considered by the courts as a sanction and are therefore not enforceable (see Dunlop Pneumatic Tyre Co Ltd v. New Garage and Motor Co Ltd), although this is unlikely, as courts are very reluctant to intervene in contractual agreements freely negotiated by two commercial parties with a similar reputation. Pass-through agreements can take many forms. Although pass-through agreements have been applied, a written agreement is much stronger from a legal point of view. It is not necessary for a liquidation agreement to be part of the initial subcontract. On the contrary, “the general contractor may be held liable for the subcontractor`s rights of way through a separate liquidation agreement”. Rad & D`Aprile Inc. vs. Arnell Constr.

Corp., 2015 NY Slip Op. 25191 (June 5, 2015). However, a subcontract agreement is established well in prior to the dispute and may not reflect the needs and wishes of the parties when a claim arose. It is therefore desirable to establish a separate agreement containing a provision which states the intention of the parties to replace the contrary provisions of the subcontract. The courts have accepted that a passage agreement may modify the rights and obligations of the parties imposed by the subcontract. HOH Co. v. Travelers Indem.

Co., 903 F.3d 8, 12 (1990). The court also found that the implied good faith and fair trade agreement, which exists in all New York contracts, applies to the liquidation of agreements. In this context, the agreement requires `to take all appropriate measures to ensure that the right of the [subcontractor] to possible recovery, if any, is protected by the [owner]`. By signing the contractual agreement, the contractor accepts the amount of the lump sum damage that the employer can recover if the contractor does not provide the project within the completion deadlines. While the liquidation agreement may provide for immediate reimbursement of court and attorney`s fees, reimbursement is not always immediate. Unpaid fees for lawyers, experts and sellers are usually compared to the proceeds of the settlement or award before a party receives its share of the indicated arbitral award. The liquidation agreement should indicate the costs, fees or both to be paid before the transaction is distributed and whether a fiduciary agreement is necessary to facilitate the conclusion of the liquidation costs. . . .

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