The United States of America for the Use and Benefit Offederal Roofing and Painting, Inc., Plaintiff-appellant, v. Foster Construction (panama) S.a., et al., Defendants-appellees, 456 F.2d 250 (5th Cir. 1972)

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U.S. Court of Appeals for the Fifth Circuit - 456 F.2d 250 (5th Cir. 1972) March 6, 1972

Henry L. Newell, Balboa, Canal Zone, for plaintiff-appellant.

W. J. Sheridan, Jr., Balboa Heights, Canal Zone, for defendants-appellees.

Before BELL, DYER and CLARK, Circuit Judges.


In the district court Foster, the prime contractor, was held entitled to withhold from Federal, its subcontractor, provable overhead expenses incurred by Foster from project delay caused by Federal in excess of the amount of liquidated damages recovered by the Government against Foster. We affirm.

The amount of liquidated damages which the prime contract required be paid to the Government, as owner of the project, bears no absolute relationship to the amount of overhead expenses suffered by the prime contractor because of the subcontractor's failure to timely perform its obligations under the subcontract. Therefore, this amount does not govern, as between the latter parties, unless such liquidated damage amount was adopted by the prime and subcontractor as the measure of damages for any breach of their agreement. While the subcontract contained a clause providing that "in general" the parties would assume the correlative positions of the parties in the prime contract, it also contained a specific proviso that payments due the subcontractor would be subject to offset for reasonable claims arising out of performance of the subcontract work. Accordingly, Foster is entitled to withhold from payment to its subcontractor Federal provable damages which it has incurred under the subcontract.



Rule 18, 5 Cir.; See Isbell Enterprises, Inc. v. Citizens Casualty Co. of New York et al., 5 Cir. 1970, 431 F.2d 409, Part I