USA – LOUISIANA Law and Practice Contributed by: Jeffrey P. Good, Susan M. Tyler, B. Trevor Wilson and Parker Hufft, Jones Walker LLP
the overall project. In the case of a contractual breach, the liquidated damages clause relieves the non- breaching party of the need to prove actual damages. Liquidated Damages Liquidated damages may not be imposed as a penalty and must be intended to compensate the owner for the contractor’s delay. Thus, the stipulated amount must represent a reasonable estimate of the anticipat - ed or actual loss resulting from the failure to complete the work on schedule, made at the time the contract was executed. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance The most commonly used device for securing con - tractor performance on a project is a contractual requirement that the contractor furnishes and main - tains performance and payment bonds. Such bonds are required on public projects, but not on private projects, although they offer important protection to the private owner and its property, as discussed in 7.6 Liens or Encumbrances in the Event of Non- Payment . The Louisiana Private Works Act, Louisiana Revised Statutes Section 9:4801, et seq, requires statutory bonds to be obtained from a solvent, legal surety. The Act also specifies the conditions of the bond, namely: • that the surety guarantees to the owner and all persons having a claim against the contractor the payment of their claims or all amounts owed to them arising out of the work performed; and • that the surety guarantees to the owner the com - plete and timely performance of the construction contract. The amount of the bond is specified with reference to the amount of the contract price. 7.6 Liens or Encumbrances in the Event of Non-Payment In 2020, Louisiana overhauled its Private Works Act with respect to privately owned construction projects, LSA-R.S. 9:4801, et seq, which serves the purpose of protecting persons who furnish labour, materials, equipment or services for the construction or repair
of immovable property by creating privileges in their favour on the property. In general, the Act creates two classes of claimants in the event of non-payment: persons who perform work or services directly for a property owner (eg, the general contractor) and persons who perform work or services for the owner’s general contractor (ie, subcontractors, sub-subcontractors and suppliers). In regard to the first category, the Act grants a claim - ant a privilege on the owner’s property that serves to secure payment of the claimant’s contractual claim against the owner. The second category of claimant is provided a claim against the contractor and owner, notwithstanding the lack of contractual privity with the owner, as well as a privilege on the owner’s property. Filing Claims The privileges are not self-executing. Rather, a state - ment of claim and privilege (referred to colloquially as a lien) must be filed in the mortgage records of the parish where the project is located, in accordance with the requirements of the Act. Furthermore, because privilege merely acts as security for the payment of the underlying claim, a suit to enforce the claim and privilege must be filed within one year of the filing of the statement of claim and privilege, or both the claim and privilege will be extinguished by operation of law. Protection From Claims The act does provide a mechanism through which an owner can protect itself from claims and privileges, namely the filing of a notice of contract and a payment bond prior to the commencement of work. If a notice of the contract and bond is filed in accordance with the Act, the proper filing of the notice of contract and bond allows the owner to avoid personal liability to the second class of lien claimants (ie, those with whom the owner does not have contractual privity), and the lien attaches to the bond rather than the owner’s prop - erty. 7.7 Requirements Before Use or Inhabitation Upon completion of construction, and in compliance with the Act, the owner and contractor will execute a notice of termination or substantial completion and record it in the mortgage records of the parish where the property is located. If a notice of contract was
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