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socrateaser
socrateaser, Lawyer
Category: Real Estate Law
Satisfied Customers: 37957
Experience:  Attorney and Real Estate broker -- Retired (mostly)
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Charleston, South Carolina. Certain storm and flood

Customer Question

Charleston, South Carolina. Certain storm and flood insurance is mandated for residential properties in certain areas under Title 7, Chapter 75 of the SC Code (I forgot which section). The property at issue is subject to the mandatory insurance. We had a bit of rain this year. Question - I'm considering a roof repair agreement contingent upon the insurer's approval of the claim. In consideration of negotiating with the adjuster, assessing the damage, and for approval actions to mitigate further damage, the cancellation clause requires a payment of 30% of the total claim. This seems off given that portions of the total claim are unrelated to the roof repair. Further, the contract does not call for the assignment of claim proceeds to the contractor. Would it be more appropriate to replace the 30% figure with a set liquidated sum in the cancellation clause.
Submitted: 12 months ago.
Category: Real Estate Law
Expert:  socrateaser replied 12 months ago.

Hello,

Liquidated damages are intended to fix contract damages where it would be unreasonably difficult to estimate contract damages in advance. The contractor knows how much his/her time is worth, so you ought to be able to determine those costs based upon an hourly fee, in the event that the insurance claim is not approved.

Fixing the cancellation fee based upon the ultimate size of the claim provides an incentive for the contractor to increase the price, because that increases the damages if the claim isn't approved. There's no way I would agree to that provision. I'd either offer a fixed amount for his time, or offer to pay an hourly fee.

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