Total Cost

Definition

Total cost is a method of computing damages sustained by a contractor due to breaches of contract, causing inefficient or unproductive operation.

Purpose

The purpose of the total cost method is to quantify the financial impact of contract breaches on a contractor, ensuring they receive compensation for additional costs incurred.

Examples of Use

1. Construction Delays: A contractor calculates the total cost of delays caused by a client's failure to provide necessary materials on time.
2. Changed Conditions: When unforeseen site conditions increase project costs, the total cost method helps determine the additional expenses.
3. Contract Breach: A contractor uses the total cost method to claim damages for breaches that caused operational inefficiencies.

Related Terms

• Damages: Financial compensation sought for losses suffered due to a breach of contract.
• Breach of Contract: Failure to fulfill the terms of a contract without a lawful excuse.
• Cost Overrun: Exceeding the budgeted cost of a project.

Notes

• Calculation: The total cost method involves comparing the actual cost of completing the work with the original bid or estimated cost.
• Legal Requirements: Courts may require detailed documentation and justification for claims made using the total cost method.