There are plenty of red flags to look out for in construction contracts, and no damage for delay clauses are one of them. As a construction lawyer, keep an eye out for no damage for delay clauses when reviewing contracts for your construction clients.
These clauses can cost contractors loads of money if something goes wrong on a job site. Identifying and reconciling the language before the contract is signed can be a great deterrent to issues down the road.
What is a ‘no damage for delay’ clause?
Let’s start with the basics. In the event that there is a delay on a job, a no damage for delay clause absolves the owner from any additional expenses. no damage for delay clauses usually refer only to excusable delays–that is, a delay that is not the fault of the contractor.
These clauses are almost entirely to the benefit of the owner. Therefore, it is not uncommon to find owners inserting no damage for delay clauses into their contracts to protect themselves. However, as a construction lawyer looking out for your clients, these clauses should be viewed most often as red flags.
How no damage for delay clauses can cost contractors
If a delay should arise on a job, a no damage for delay clause is usually going to leave the contractor to foot the bill. The contractor will likely need to maintain their crew, equipment, and any other assets for the duration of the work stoppage. Depending on the nature of the delay, this could mean footing the cost of maintenance for long periods of time without pay.
Normally, contractors would file a delay claim to offset these unforeseen expenses, but the no damage for delay clause ensures that the owner will not have to pay. By definition, the cause of the delay is beyond the control of the contractor. If the work stoppage lasts too long, it could have devastating consequences for the contractor and their business.
How to deal with no damage for delay clauses in construction contracts
As a lawyer in an ideal world, you’d get to work with all your clients from the beginning. You’d get to review contracts and renegotiate clauses like the no pay for delay that put your client at risk or disadvantage.
Of course, that’s not always the case. Most folks don’t call a lawyer until there’s already a problem.
However, even if the contract has been signed and the work has already begun, all might not be lost when a delay comes up. There’s legal precedent to suggest that no damage for delay clauses don’t always hold up in court. There has been successful litigation that brought enforcement into question by arguing that delays came from downstream. In other words, delays caused by someone working above the contractor.
Contractors may also be able to fight no damage for delay clauses when the delay was caused by unforeseen circumstances. Never let your client sign a contract explicitly excluding pay for delay due to these kinds of unforeseen events, also known as force majeure. The widespread impact of COVID on construction job sites over the last year has shown us that the unexpected can come out of nowhere.
Tip: If your client does need to submit a claim for delay beyond their power, make sure to do so within the allotted time frame, as waiting too long in many states can forfeit rights to claim recompense.
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