No Damages for Delays if Contractually Waived

Mar 29, 2017

Subcontractor cannot obtain damages triggered by delays caused by the owner’s or contractor’s ineptitude if this right is contractually waived.

Kent Holland Jr., in an article in ConstructionRisk.com explains why a New York court ruled against a subcontractor that filed for damages it allegedly incurred because of project mismanagement by the owner and construction manager.

In this case, an electrical subcontractor claimed that “inept administration and poor administration” by the owner and its construction manager resulted in financial losses for the subcontractor. Weydman Electric Inc. v. Joint Schools Construction Board, et al., 140 A.D.3d 1605 (NY 2016).

The defendants filed for summary judgment claiming that the “no-damages-for- delay” provision of the contract precluded the electrician from asserting its claim. The court agreed with the defendant and its decision was upheld on appeal.

The plaintiff claimed that the no-damages-for-delay clause was “contrary to public policy.” The court disagreed noting that the provision in question was part of a valid contract.

The court explained that the clause may be found unenforceable in some circumstances.

“These include the following: ‘(1) delays caused by the contractee’s bad faith or its willful, malicious, or grossly negligent conduct, (2) uncontemplated delays, (3) delays so unreasonable that the constitute an intentional abandonment of the contract by the contractee, and (4) delays resulting from the contractees breach of a fundamental obligation under the contract.’”

The court ruled that the plaintiff had the “’heavy burden’” of proving one of these exceptions existed. The facts in the case did not support the electric company’s attempts to do this.

The court also noted that the contract reflected the parties’ mutual acknowledgment that delays were likely to occur.

This is a “hard decision”; arguably unfair. Mr. Holland emphasizes that a “no-damages-for-delay clause is a serious risk-shifting clause in a construction contract.” He advises subcontractors to have these clauses removed from their construction agreements. This is sound advice.

Source—

“No-Damages-for-Delay Clause Enforced Even if Project Ineptly Planned and Managed,” Kent Holland, ConstructionRisk.com, February 2017.