McConnell Inc. contracted to build a commercial building for Pelosi Inc. The contract called for completion on June 1 of the current year. The price was $2,000,000.00, payable in installments at $500,000.00 on 9/1, 12/1, 3/1 and on 6/15 – (two weeks after the scheduled completion date.)

McConnell was unable to complete the building until 6/18 and at that time the building met all inspection and code requirements and Pelosi was able to move in.

Included in the contract was the following provision:

Builder (McConnell) acknowledges that time is of the essence. For every day beyond the contracted, 6/1 date that the building is unavailable to Buyer (Pelosi), Buyer shall reduce payment $1500.00 per day to a maximum reduction of $60,000.00.

On July 2 Pelosi made the final payment of $474,500.00 ($500,000 - $25,500) to McConnell noting the building was delivered 17 days beyond the contracted date.

McConnell sued for the remaining payment of $25,500 arguing that he was late due to a supplier who went out of business during the project and due to a one week strike by McConnell plumbers. McConnell also indicated that the $25,500 was excessive and amounted to a penalty.

Indicate who should prevail and support your answer. Also, make sure you advance arguments for both sides.