CLIENT SPOTLIGHT: Grillo's Pickles

If you haven't been to the Grillo's Pickles website, you should. There, you'll find the fantastic story of how this company began. We've copied part of it here to save you a click.

Grillo's Pickles began with a pickle cart, just a small wooden stand in downtown Boston, where Travis Grillo and his friends would sell two spears for one dollar. Travis would make the pickles by night using his family's 100-year old recipe - one he'd memorized from making pickles every summer as a kid. In the morning, Travis would bike to the Boston Common and set up the cart with his buddies. They'd hang out all day, urging people to try the simple Grillo family pickle. It was a small business but Travis worked hard for it. He made more pickles, biked more miles, and slept less hours than he ever had before.
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CLIENT SPOTLIGHT: Factory Five Racing

Factory Five Racing was founded in 1995. Over the years they have grown from a start-up business in a small garage to become the world's largest manufacturer of "build-it-yourself" component car kits. They employ a full-time crew of about 40 people, and are located in Wareham, Massachusetts (about an hour south of Boston). They make their products right here in the USA, in the heart of New England where American manufacturing was born.
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Fred and Danny Magnanimi grew up watching their father create beautiful, handcrafted jewelry in the family's Cranston, RI jewelry manufacturing business. When the boys grew up, Fred moved to New York and began working on Wall Street as an investment banker, while younger brother Danny, still enamored by the family business, stayed home. Increased competition from overseas businesses created significant challenges for the business, but Danny was confident he could find a way for the family business to evolve and thrive. This was his mission, this was his passion.
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        Strategies for Negotiating Liquidated Damage Clauses

        As seen in the New England Real Estate Journal , June 17 - 23, 2016 edition.

        For those who negotiate construc­tion contracts, we know some terms are much harder to negotiate than others (e.g., indemnity clauses, no damage for delay, warranties, assignment rights, etc.). Invariably, however, one of the toughest terms is the liquidated dam­age clause. In essence, the liquidated damage clause requires a contractor to pay a pre-determined amount of delay damages for failing to deliver the project timely. This article will briefly discuss the rationale for liquidated damages and then provide numerous options for reaching an agreement on this hotly disputed clause.

        Liquidated damages are designed to protect the owner in the event the contractor delays completion of a project. These damages typically include extended carry costs (e.g., loans, insurance, etc.). However, these damages could also include lost rent and potentially lost tenants. For example, many leases have clauses that permit a reduction in rent or the complete cancellation of the lease if the premises are not delivered timely. In short, owners are exposed to signif­icant damages for late delivery.

        Sometimes the amount of actual damages suffered by the owner would be extremely difficult to establish. Indeed, the costs of calculating and proving these damages in court might rival the amount of the damages them­selves. Accordingly, where damages would be difficult to ascertain, courts will typically allow the parties to reach an agreement on a fixed or “liquidated” damage amount. If the agreed upon amount is too high, courts might strike it (leaving the parties to prove actual damages) because “penalties” are typically not permitted in liquidated damage clauses; only reasonable estimates of actual damages.

        Contractors typically loath liquidat­ed damage clauses. However, in the absence of such a clause, the contractor is exposed to actual damages (as well as the costs of calculating and rebutting the owner’s assessment). Accordingly, it frequently makes sense for both parties to reach an agreement in ad­vance on what those damages would be. The parties must not only agree on the amount of liquidated damages, but they must also agree on the form of the liquidated damage clause including what triggers payment. As noted below, the parties have numerous options.

        What are the various options for liquidated damage clauses? First, the parties can agree payment of liquidated damages commences the day after the substantial completion deadline. Second, the parties can agree to give the contractor a grace period after substantial completion (e.g., liquidated damages commence on the seventh day after substantial completion, etc.). Third, the parties can agree the amount of liquidated damages will increase after time thresholds (e.g., $500 for days 1-10, $1,000 for days 11-21, etc.). Fourth, the parties can agree to a put a “cap” on the amount of liquidated damages (e.g., in no event shall liqui­dated damages exceed the contractor’s anticipated profit as reflected in the agreed upon schedule of values).

        Fifth, the parties can negotiate the liquidated damage and no damage for delay clauses together. In overly simplistic terms, a no damage for delay clause prohibits the contractor from seeking delay damages caused by the owner. Owner caused delays can arise if the owner fails to approve submittals timely or if the owner provides sub-standard architectural drawings. Under this fifth option, for example, the owner would permit the contractor to collect delay damages after a grace period and, in exchange, the contractor would permit the owner to collect liquidated damages after a grace period. Indeed, many liquidated damage clauses reflect such “horse trading”.

        The question frequently asked is what is the “best” form of liquidated damage clause? The answer is con­tingent on numerous project-specific factors. For example, how familiar is the owner with the contractor, the contractor with the architect, and the contractor with the type of project?

        Also, how does the contractor’s qual­ifications, bid amount, and availability compare with other contractors? These factors often assist in determining which type of liquidated damage clause is “best” for a specific project.

        In short, the liquidated damage clause is typically one of the most diffi­cult clauses to negotiate. However, the numerous options should enable the parties to cobble together a mutually acceptable clause.