In BLDG 44 Developers LLC v. Pace Companies N.Y., LLC, 2025 N.Y. Slip Op 32881(U) (Sup. Ct., N.Y. County July 25, 2025) (here), BLDG 44 Developers LLC sued Pace Companies New York, LLC for breach of contract, seeking approximately $16 million in consequential damages related to delays in a construction project on E. 44th Street, New York, N.Y. BLDG, the project owner, was a third-party beneficiary to a subcontract between Pace and Noble Construction Group, which was later replaced by a joint venture. The subcontract required Pace to perform HVAC work and included indemnification provisions for damages caused by delays.
Pace moved for partial summary judgment to dismiss BLDG’s claim for consequential damages. The motion court granted the motion, finding that the subcontract did not explicitly provide for consequential damages, such as lost rents or revenues. The motion court noted that while the subcontract mentioned indemnification for damages, it did not specify consequential damages, and the inclusion of liquidated damages suggested intentional exclusion of other types of damages.
The court emphasized that consequential damages must be foreseeable and contemplated by the parties at the time of contracting. The motion court held that BLDG failed to present evidence that such damages were discussed or anticipated during negotiations. The motion court also rejected BLDG’s reliance on industry standards and external documents, stating that the clear and unambiguous language of the subcontract governed.
Consequently, the motion court ruled that the absence of express language regarding consequential damages barred BLDG’s claim, and granted Pace’s motion for partial summary judgment, dismissing the consequential damages claim.
Background
BLDG owns a 43-story mixed-use building located on E. 44th Street, New York, N.Y. (the “Building”). On May 29, 2015, BLDG and former third-party defendant Noble Construction Group, LLC (“Noble”) entered into an agreement (“Prime Agreement”) in which Noble was to serve as the general construction manager on the construction of the Building (the “Project”) in exchange for $175,982,009. On February 1, 2016, Noble and defendant entered into a subcontract in which defendant was to perform heating, ventilation, and air conditioning trade work for the Project in exchange for $12,200,000 (“Subcontract”).
Section 7.2 (e) of the Subcontract provided, in pertinent part, that if there were delays in the progress of the work on the Project or a failure to coordinate with other contractors by defendant then BLDG was entitled to recover its damages (including liquidated damages if applicable) in connection with such delays.
On June 1, 2016, BLDG and Noble amended the Prime Agreement (“Amendment No. 2”), replacing Noble with Noble/Suffolk, a joint venture LLC (“JV”). In Amendment No. 2, BLDG and JV agreed to “waive Claims against each other for consequential damages arising out of or relating to the [Prime] Agreement except as set forth in the last sentence of this Item No. 2.” The waiver provision explained that “[t]his mutual waiver include[d], without limitation, damages incurred by [BLDG] for losses of use, income (including, but not limited to rental income), profit, financing, business and reputation, and for loss of management or employee productivity or of the services of such persons.” “Notwithstanding the foregoing,” the parties agreed that the JV would “be liable for consequential damages arising out of [the] Agreement to the extent caused by its breach or negligence or the breach or negligence of anyone for whom [JV] [was] responsible in an aggregate amount not to exceed fifty percent (50%) of [JV]’s Fee as set forth in the most updated schedule of values.”
On August 23, 2018, JV provided defendant with a delay notice regarding the Project after the JV received a notice of delay from BLDG regarding defendant’s work (“Delay Notice”). The Delay Notice stated that BLDG would “be seeking reimbursement for damages and consequential damages resulting from such delay”.
On January 16, 2020, BLDG commenced the action against defendant as a third-party beneficiary alleging that defendant breached the Subcontract.
Defendant moved for partial summary judgment seeking to exclude $16 million in consequential damages from any potential award in BLDG’s favor.
The Motion Court’s Decision
BLDG argued that defendant explicitly agreed to indemnify BLDG for consequential damages incurred resulting from defendant’s delay. Specifically, BLDG argued that the language in Section 7.2(e) of the Subcontract included consequential damages.
Under New York law, “[i]n claims for breach of contract, a party’s recovery is ordinarily limited to general damages which are the natural and probable consequence of the breach; any additional recovery must be premised upon a showing that the unusual or extraordinary damages sought were within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting.”[1] A party may seek consequential damages if they were foreseeable and contemplated by the contracting parties at the time the contract was made.[2]
Applying the foregoing principles, the motion court held that “the evidence fail[ed] to demonstrate that consequential damages of lost rents and revenues were contemplated by the parties to the Subcontract.”[3] The motion court found that “the plain language of the Subcontract, itself, [did] not specifically provide for indemnification of consequential damages.”[4] “Consequential damages in a breach of contract case are not allowable where the contract contains no provision or language indicating that recovery of consequential damages was within the contemplation of the parties[,]” said the motion court.[5] The motion court noted that the “terms of the Subcontract [did] not suggest that consequential damages would be covered.”[6] Moreover, noted the motion court, “BLDG ha[d] not identified … any other term in the Subcontract that would support such damages.”[7]
“Absent a contractual provision providing for such coverage,” said the motion court, “in order ‘[t]o determine whether consequential damages were reasonably contemplated by the parties, courts must look to the nature, purpose and particular circumstances of the contract known by the parties . . . as well as what liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it assumed, when the contract was made.”[8] Thus, explained the motion court, “the question is whether [defendant] and Noble reasonably foresaw or contemplated [defendant] being held liable for BLDG’s consequential damages of lost rents and revenues … due to [defendant]’s alleged delays at the time they entered the Subcontract.”[9] The motion court held that “[t]here [was] no evidence of such contemplation.”[10] “For example,” said the motion court, “there [was] no evidence that establishe[d], or at a minimum raise[d] an issue of fact, that the issue of liability for lost revenue and rents was contemplated by the parties at the time of contract negotiations.”[11]
Finally, the motion court rejected BLDG’s attempt to use extrinsic evidence to support its claim for consequential damages. BLDG argued that consequential damages are common in the construction industry and that the motion court could take judicial notice of the American Institute of Architects form agreement, which includes a provision waiving consequential damages.[12] The motion court explained that there was “no need to turn to extrinsic evidence” because Amendment No. 2 was clear and unambiguous.[13] In that regard, the motion court found that “the agreement itself suggest[ed] the omission was purposeful. Amendment No. 2 to the Prime Agreement contain[ed] a provision limiting JV’s liability for consequential damages. If the parties intended to include consequential damages as part of the Subcontract, they would have specifically so stated.”[14] The motion court concluded that “[t]he best and only evidence that the court has [was] the Subcontract itself, which [made] no mention of consequential damages, unlike liquidated damages, which are specifically referenced.”[15]
Accordingly, the motion court granted defendant’s motion for summary judgment and dismissed any claim for consequential damages.[16]
Takeaway
As discussed, consequential damages are recoverable only if they were foreseeable and contemplated by both parties at the time they entered the contract. Courts look to the language in the parties’ contract to make that determination. Thus, as shown in BLDG, even if a party believes consequential damages are implied or customary, courts will rely on the language of the agreement if it is clear and unambiguous. In BLDG, the motion court determined that the agreements at issue were clear and unambiguous. Lending support to that finding was the presence of a liquidated damages clause in the Subcontract, which suggested to the motion court that the parties intentionally excluded other types of damages, such as consequential damages, as recoverable damages.[17] Therefore, based upon the evidence presented, the motion court determined dismissed BLDG’s request for consequential damages.
[1] Brody Truck Rental, Inc. v. Country Wide Ins. Co., 277 A.D.2d 125, 125-126 (1st Dept. 2000) (internal quotation marks and citations omitted), lv. dismissed, 96 N.Y.2d 854 (2001).
[2] Bi-Economy Mkt., Inc. v. Harleysville Ins. Co. of N.Y., 10 N.Y.3d 187, 192-193 (2008).
[3] Slip Op. at *5.
[4] Id.
[5] Id. at *6 (quoting BSF W. 175th St. Holding LLC v. New Founders Constr. LLC, 2022 N.Y.L.J. LEXIS 191, *9-10 (Sup. Ct., N.Y. County 2022)) (internal citations and quotation marks omitted).
[6] Id.
[7] Id.
[8] Id. (quoting Bi-Economy Mkt., 10 N.Y.3d at 193 (internal quotation marks and citation omitted)).
[9] Id.
[10] Id.
[11] Id. at *6-*7 (citing Ashland Mgt. v. Janien, 82 N.Y.2d 395, 405 (1993) (finding that “the issue of future earnings was not only contemplated but also fully debated and analyzed by sophisticated business professionals at the time of these extended contract negotiations”); Awards.com v Kinko’s, Inc., 42 A.D.3d 178, 183 (1st Dept. 2007) (finding that “[t]he agreement fails to reflect that the parties contemplated lost profits as a potential basis for damages in the event of a breach. Nor, even if admissible, is there any extrinsic evidence that lost profits were within the parties’ contemplation”)).
[12] Id. at *7.
[13] Id.
[14] Id.
[15] Id. (citations omitted).
[16] Id. at *8.
[17] This BLOG has written numerous articles addressing consequential damages. To find such articles, please click on the BLOG tile on our website and type “consequential damages” into the “search” bar, or any other commercial litigation or contract-related issue that may be of interest to you.
