Construction jobs go off-schedule. As a contractor or sub, this is basically a fact of life – even the best laid plans can fail. But what happens when your work is affected by someone else‘s problem, costing you money?
When a job really goes awry and costs a construction company precious time and money, that company might sue for damages related to the delay. Thus, the “No Damages for Delay” clause was born – to protect owners, developers, and contractors from having to haggle over damages due to project delays. While these clauses are generally enforceable, they have a limit.
Table of Contents
No Damages For Delay Clauses
So when a No Damages for Delay clause is present, that’s that – right? A claim for money lost due to a delay is moot?
Well, it’s not that cut and dry.
A recent case helps to show the limits of a No Damages for Delay clause on a federal job – Rai Industrial Fabricators v. Federal Insurance company. JD Supra also has a nice little breakdown of the case here.
Limits of a California No Damages for Delay Clause
Let’s set the stage. The Army hired a contractor to construct a training facility, and that contractor brought on a subcontractor for steel erection. Throughout the life of the project, there were significant delays which cost that subcontractor quite a bit of time and money. Despite having a No Damages for Delay clause in the subcontract, the subcontractor sued.
In the suit, the subcontractor alleged that the project’s delays were a result of the contractor’s failure to coordinate subcontractor work, failure to follow project schedules and change order procedures. Importantly, the subcontractor also argued that that unanticipated changes to scope and workflow contributed to delays.
The contractor argued that, despite all of the above allegations, the No Damages for Delay clause in the contract left all of these issues moot, and that there could be no damages for the delays – it’s in the contract. The court disagreed.
When CA No Damages for Delay Clauses Will Falter
The court found that the delays in this case could be tied to the contractor changing the drawings for the project as well as the scope of work. Plus, the contractor failed to stick to the contract themselves – the procedures and guidelines for change orders and extra work weren’t adhered to. Finally, the contractor had supplied steel pieces that did not conform to the project specs, which resulted in the sub having to make extensive field repairs and assembly – hundreds of pieces were defective. On top of all that, the contractor refused to grant the sub an extension of time.
According to the court, a No Damages for Delay clause won’t prevent recovery (1) When delays are unreasonable; and (2) When the contract has been impliedly abandoned. Based on the above findings, the court found that in this instance, strictly following the No Damages for Delay clause was not necessary, and that the subcontractor might be entitled to recovery.
It’s in the title! No Damages for Delay clauses aren’t a “Get Out of Jail Free” card!
But seriously – No Damages for Delay clauses are typically enforceable. However, when the issues causing the delay (thereby causing damages) occur due to unreasonable project conditions and/or due to the project requiring work not contemplated in the claimant’s contract – protection will not be as strong.