In E Solutions for Buildings, LLC v. Knestrick Contractor, Inc., et al., appellant E Solutions for Buildings, LLC (“E Solutions”) challenged the trial court’s award as it related to a subcontractor’s payments owed to E Solutions. 2019 WL 5607473 (Tenn. Ct. App. 2019). The case stemmed from the construction of the Centennial Sportsplex Indoor Fitness Expansion Building (the “Sportsplex”) by the Metropolitan Government of Nashville and Davidson County (“Metro”). Metro entered into a contract with Knestrick Contractor, Inc. (“Knestrick”) for the construction of the Sportsplex (the “Contract”). Under the Contract, Knestrick was obligated to accomplish substantial completion of the project by December 2, 2013.

Knestrick in turn entered into a subcontract with Air Comfort Heating & Cooling, LLC (“Air Comfort”) for HVAC work required for the project (the “Subcontract”). The Subcontract specifically provided that work must be performed on or before November 27, 2013. The Subcontract included a $1,000.00 fee per day of delay to be charged to Air Comfort. Air Comfort likewise sought to purchase certain HVAC equipment, and entered into negotiations with appellant E Solutions.

E Solutions sent Air Comfort a proposal for the equipment, and Air Comfort submitted a purchase order on November 13, 2013 (the “purchase order”). The purchase order recited a delivery date of December 13, 2013 and also included a $1,000.00 fee per day of day, but the terms and conditions provided that “Shipment dates are estimates only,” and that E Solutions is not responsible for any incidental, consequential, or liquidated damages.

The Contract deadline proved untenable, and Metro and Knestrick extended the substantial completion date to January 26, 2014. A Knestrick officer testified that an extension was also passed down to the subcontractors. Ultimately, the project was not certifiably complete until May 8, 2014.

E Solutions filed the initial Complaint alleging it had not been paid for the materials, equipment, and services it provided on the project. The trial court awarded E Solutions judgment in the amount of $42,847.98 against Air Comfort.

E Solutions appealed, arguing this awarded judgment was insufficient. The primary dispute between Air Comfort and E Solutions related to Air Comfort’s failure to pay for the equipment it purchased from E Solutions. Testimony at trial revealed that unpaid invoices equated to $52,847.98, but the trial court reduced this amount by $10,000.00 upon finding that E Solutions was responsible for ten days of delay on the project. Air Comfort argued that no judgment should have been awarded to E Solutions on the grounds that E Solutions materially breached the contract by failing to deliver the equipment by December 13, 2013.

Trial testimony indicated that Air Comfort did not expect delivery of the equipment by December 13. The Appellate Court also recognized that the purchase order did not obligate E Solutions to deliver the equipment on or before that date. Moreover, evidence at trial showed that E Solutions ran into manufacturing delays when ordered the equipment.

Likewise, the Appellate Court agreed with the trial court that Air Comfort was responsible for paying for the equipment that E Solutions provided. However, it disagreed with the trial court’s decision to reduce the amount of the judgment by $10,000.00 since the $1,000.00 fee per day of delay was not enforceable upon E Solutions. The Appellate Court entered a modified judgment in favor of E Solutions in the amount of $52,847.98.

This ruling recognizes a Court’s unwillingness to pass down liquidated damages awards. The Appellate Court found that the reduction of E Solution’s award by $10,000.00 was essentially an award of liquidated damages to Air Comfort. This was unwarranted given that E Solutions was not a party to the Subcontract between Air Comfort and Knestrick. The Appellate Court found that the $10,000.00 damages were not foreseeable or tied to a contractual basis in the purchase order between E Solutions and Air Comfort.