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March 1st, 2018
construction
ALABAMA COURT OF CIVIL APPEALS DETERMINES CONTRACTOR IS ENTITLED TO AN AWARD OF PREJUDGMENT INTEREST DESPITE FACTUAL DISPUTE AS TO AMOUNT DUE PURSUANT ORAL CONTRACT

In Ballard v. Lee A. McWilliams Constr., Inc., No. 2160469, 2018 WL 670459, at *1 (Ala. Civ. App. Feb. 2, 2018), the Alabama Court of Civil Appeals determined an award of prejudgment interest is due despite a defense that such damages should not be recoverable given that they were not “certain” at the time of the alleged breach due to the parties’ disagreement on the amount owed under the oral cost-plus contract.

In January 2010, Lee A. McWilliams Construction, Inc. (“McWilliams”) began renovation work on a house owned by Angel Ballard (“Ballard”). Rather than a fixed sum contract, Ballard and McWilliams orally agreed that she would pay the company for the costs of materials plus 18%. Ballard failed to pay the full amount of the final invoice and McWilliams filed suit. After judgment was entered in favor of McWilliams for the unpaid portion of the final invoice, McWilliams filed a timely postjudgment motion seeking prejudgment interest.

Alabama Code § 8–8–8 dictates interest is recoverable in contract actions “from the day such money . . . should have been paid” through the date of judgment. The Alabama Supreme Court has clarified that the right to prejudgment interest pursuant to this section is only due “where an amount is certain or can be made certain as to damages at the time of breach.” Ballard challenged McWilliams’s right to prejudgment interest, arguing that “because the damages that the company had requested changed during the litigation as a result of the discovery of certain mathematical errors and other mistakes on the invoices”, the damages “were not ‘certain or . . . capable of being made certain’ at the time of the breach.”

While the Court of Civil Appeals agreed damages must be certain in order to be entitled to an award of prejudgment interest, it held that a dispute as to how much is owed does not prevent a determination that the damages are “certain.”  Rather, once the amount of damages is fixed, “§ 8-8-8 provides for prejudgment interest on that amount.” The Court concluded, “although certain adjustments in the amount the company claimed were made after completion of the discovery process, the damages . . . were capable of being reasonably ascertained at the time of the breach by mathematical computation (a tabulation of the outstanding costs of the project plus 18%).” 

This case is a good reminder for any party to a contract as to what damages may properly be assessed if a judgment is entered against them. While prejudgment interest is only recoverable if the amount due at the time of the breach is certain and capable of being determined by a simple mathematical computation, the Alabama Court of Civil Appeals construed the term “certain” very liberally and award prejudgment interest even though the parties’ dispute arose from not being able to agree on the amount actually due.

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