{"id":899282,"date":"2021-10-27T16:21:31","date_gmt":"2021-10-27T22:21:31","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=899282"},"modified":"2021-10-27T16:21:42","modified_gmt":"2021-10-27T22:21:42","slug":"no-damage-for-delay-exceptions","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/no-damage-for-delay-exceptions\/","title":{"rendered":"No Damage for Delay? No Problem: Exceptions to the Enforceability of No Damage for Delay Clauses"},"content":{"rendered":"\n

Chris Broughton | ConsensusDocs<\/a><\/p>\n\n\n\n

Introduction:<\/strong><\/p>\n\n\n\n

Under a no-damage-for-delay clause<\/a>, the owner is not liable for any monetary damages resulting from delays on the project. In lieu of monetary recovery, the contractor\u2019s remaining remedy is a non-compensatory time extension. These clauses are common at the contractor-subcontractor interface as well.<\/p>\n\n\n\n

While no-damage-for-delay clauses are enforced in most jurisdictions, some states, either by statute or case law, have limited the enforceability of no-damage-for-delay clauses. Other states have also limited the enforceability of these clauses on state government contracts, and a select few have outlawed them on all projects regardless if they are publicly or privately owned. Additionally, for subcontractors on federal projects, the Miller Act may provide a way to avoid no-damage-for-delay and recover against the general contractor\u2019s payment bond.<\/p>\n\n\n\n

This article provides an overview of no-damage-for-delay clauses and the exceptions to enforcement of these clauses. However, due to the consequences of a no-damage-for-delay clause, it is important to know the terms of your contract and the law that governs your project.<\/p>\n\n\n\n

Sample No-Damage-for-Delay Clause<\/strong>:<\/p>\n\n\n\n

As noted above, an owner or contractor may attempt to prospectively allocate the risk and shift financial responsibility for delay through a no-damage-for-delay clause in the contract.<\/p>\n\n\n\n

The ConsensusDocs standard prime and subcontracts do not include a no-damage-for-delay clause. Nevertheless, an example of a no-damage-for-delay clause is as follows:<\/p>\n\n\n\n

Contractor agrees that it shall make no claims against Owner for damages, charges, interest, additional costs or fees incurred by reason of delays or suspension of work caused by the Owner, other parties under the Owner\u2019s control, or any other cause in the performance of its work under this Agreement. Contractor\u2019s sole and exclusive remedy for delays, stoppage, or suspension of the work is an extension of time equal to the duration of the delay, stoppage, or suspension to allow the Contractor to complete its work under this Agreement.<\/em><\/p>\n\n\n\n

A no-damage-for-delay clause like the sample above will likely be enforced in most states. However, as shown below, there are important exceptions that can impact your ability to recover your on project.<\/p>\n\n\n\n

Frequently Recognized Exceptions to No Damage for Delay:<\/strong><\/p>\n\n\n\n

While most states will enforce a no-damage-for-delay clause on a construction contract, there are important exceptions that have been developed through the court decisions that can impact your ability to recover your delay costs. Nevertheless, the following are the most common exceptions to a no-damages-for-delay clause:<\/p>\n\n\n\n

1.Delays that resulted from the benefiting party\u2019s bad faith, active interference, fraud or misrepresentation.<\/strong> This is the most widely adopted exception to no-damage-for-delay clauses. Courts will not allow a party to benefit from its own fraud, misrepresentation, bad faith, or active interference with the work of the other contracting party. Aside from invalidating a no-damage-for-delay clause, fraud, misrepresentation, bad faith may also give rise to a breach of a party\u2019s implied duty of good faith and fair dealing.[ii] Additionally, other jurisdictions may include gross negligence under this exception as well.[iii]<\/p>\n\n\n\n

2. Delays that were of a kind or type not contemplated by the parties.<\/strong> Some jurisdictions have held that no-damage-for-delay clauses will not bar claims resulting from delays that were not reasonably foreseeable or contemplated by the parties at the time contract. The New York Court of Appeals stated that even broadly written no-damage-for-delay clauses will encompass only delays \u201cwhich are reasonably foreseeable, arise from the contractor\u2019s work during performance, or which are mentioned in the contract.\u201d[iv] An example of a delay \u201cnot contemplated by the parties\u201d is an indefinite suspension of the work after an unknown methane gas condition was discovered on site.[v] However, it is important to note that there are many jurisdictions that do not recognize this exception. [vi]<\/p>\n\n\n\n

3.Delays that were so unreasonable that they constituted an intentional abandonment of the contract by the benefiting party.<\/strong> A no-damage-for-delay clause will not be enforced where the party benefiting from the clause abandons its contractual obligations. A party\u2019s abandonment can be express or inferred from the benefiting party\u2019s conduct and attendant circumstances surrounding performance. Importantly, abandonment can be inferred where the delays are so \u201cunreasonable in length or duration that they amount to an abandonment of the contract.\u201d[vii] For example, a court found intentional abandonment where the owner issued significant design changes that fundamentally altered the work and delayed the project by over two years. [viii]<\/p>\n\n\n\n

4. Delays resulting from a fundamental breach of contract by the benefiting party.<\/strong> While recognized in many jurisdictions, the exception for material breach is less frequently applied because the no-damage-for-delay clause is intended to encompass \u201cgarden-variety\u201d delays such as failing to timely provide materials. [ix] To qualify as a \u201cfundamental breach,\u201d the actions of the benefiting party must be a \u201ccomplete failure of a condition precedent to performance\u201d or \u201ccompletely frustrate the performance of one of the parties, not merely delay it for a time.\u201d [x]<\/p>\n\n\n\n

The cases and examples are discussed above to provide a general overview of the most commonly applied exceptions to no-damage-for-delay clauses. This is not exhaustive, and other states may recognize their own exceptions to no-damage-for-delay. Thus, it is important to understand which exceptions apply and how they are applied under the law that governs your contract.<\/p>\n\n\n\n


Additional State Statute Exceptions<\/strong><\/p>\n\n\n\n

In addition to the exceptions listed above, many states have enacted statutes that further limit or prohibit the enforceability of no-damage-for-delay clauses.<\/p>\n\n\n\n

Public Contracts<\/strong><\/p>\n\n\n\n

In particular, some states have enacted limitations or exceptions on no-damage-for-delay on state government contracts, where the clause would absolve the government entity of any monetary liability for delays. For example, in Louisiana, no-damage-for-delay clauses are void on public projects if it \u201cpurports to waive, release, or extinguish the rights of a contractor to recover\u2026 for delays in performing such contract, if such delay is caused, in whole or in part, by acts or omissions within the control of the contracting public entity.\u201d [xi] Virginia\u2019s and Colorado\u2019s statutes prohibiting no-damage-for-delay clauses on contracts between the public entity and contractor have similar language as well. [xii] North Carolina also prohibits no-damage-for-delay clauses on public contracts between the government owner and the prime contractor. [xiii]<\/p>\n\n\n\n

Public and Private Contracts<\/strong><\/p>\n\n\n\n

Furthermore, there are a select few states, notably Kentucky, Ohio, and Washington, which go one step further and prohibit no-damage-for-delay clauses on both public and private projects. [xiv] For reference, here is the operative language in Washington\u2019s statute prohibiting no-damage-for-delay clauses:<\/p>\n\n\n\n

Any clause in a construction contract, as defined in RCW 4.24.370, which purports to waive, release or extinguish the rights of a contractor, subcontractor, or supplier to damages or an equitable adjustment arising out of unreasonably delay in performance which delay is caused by the acts or omissions of the contractee or persons acting for the contractee is against public policy and is void and unenforceable. [xv]<\/p>\n\n\n\n

Federal Contracts and the Miller Act<\/strong><\/p>\n\n\n\n

On federal procurement projects, the standard contract provisions in the Federal Acquisition Regulations (\u201cFAR\u201d) allow the general contractor to recover for the government\u2019s delay. [xvi] Contrarily, absent requirements for subcontractor compliance, directives, provisions flowed down from the FAR, and other exceptions, subcontracts on federal projects are largely governed by state law. Thus, state law will determine whether a no-damages-for-delay clause is enforceable, and if so, what exceptions will apply for subcontractors on federal government projects. However, there are important protections, including the Miller Act, which may prevent enforcement of a no-damage-for-delay clause against a subcontractor in certain circumstances \u2013 particularly where the subcontractor asserts a claim against the general contractor\u2019s payment bond and the no-damage-for-delay clause includes conditional payment or recovery language.<\/p>\n\n\n\n

The Miller Act provides an alternate route for recovery for subcontractors on federal construction projects when they are not paid in full by the general contractor. Under the Miller Act, general contractors on federal government projects are required to procure a payment bond for those who provide labor or furnish materials on government contracts valued at over $100,000. [xvii] The Miller Act\u2019s purpose is remedial: to guarantee payment and provide an alternate route of recovery in lieu of the mechanic\u2019s lien right that would exist under state law.<\/p>\n\n\n\n

The Miller Act may prevent enforcement of a no-damage-for-delay clause against a subcontractor\u2019s claim against the general contractor\u2019s payment bond if the clause includes conditional payment or recovery language. For example, in United States ex rel. Kitchens To Go v. John C. Grimberg Co., Inc., 283 F.Supp.3d 476 (E.D. Va. 2017), the surety could not assert the no-damage-for-delay provision in the contract to prevent the subcontractor\u2019s recovery of its delay damages against the payment bond because the clause at issue conflicted with the Miller Act. The subcontract\u2019s no-damage-for-delay clause stated that the general contractor would not be liable for any delays on the project beyond its control. Furthermore, the no-damage-for-delay clause included language, similar to a pay-if-paid clause, which conditioned the subcontractor\u2019s recovery for any delay costs on the general contractor\u2019s reimbursement for delay from the federal government. [xx]<\/p>\n\n\n\n

The no-damage-for-delay clause violated the Miller Act because a subcontractor\u2019s claim against the payment bond cannot be conditioned on whether the government has paid its general contractor. The court noted that to condition the subcontractor\u2019s recovery on the general contractor\u2019s reimbursement from the federal government would frustrate the Miller Act\u2019s purpose: to guarantee payment for those who perform labor or furnish materials on federal projects.<\/p>\n\n\n\n

Additionally, the clause did not operate as a waiver of the subcontractor\u2019s Miller Act claim because it was executed before the subcontractor performed on the project. The Miller Act allows a party to waive its right to recover against the bond if the waiver is \u201c(1) in writing; (2) signed by the person whose right is waived; and (3) executed after the person whose right is waived has furnished labor or material for use in the performance of the contract.\u201d In this case, the subcontract, which included the no-damage-for-delay clause, was executed well before the subcontractor started its performance on the project. Thus, the no-damage-for-delay clause did not operate as a waiver of its payment bond claim under the Miller Act.<\/p>\n\n\n\n

Again, it is important to note that this decision is very specific to the language in the subcontract and the facts of this case. Thus, subcontractors should look to their contract to determine whether the Miller Act will prevent enforcement of the no-damage-for-delay clause against their payment bond claim.<\/p>\n\n\n\n

Conclusion<\/strong><\/p>\n\n\n\n

Owners and general contractors may prospectively allocate responsibility and liability for project delays to the other contracting party through a no-damage-for-delay clause. While these clauses are generally enforceable in most jurisdictions, some states, either through case law or statute, have developed important exceptions to the enforceability of no-damage-for-delay clauses, and a select few prohibit these contracts on all public and private projects. Additionally, for subcontractors on federal projects, the Miller Act may prevent enforcement of a no-damage-for-delay clause in certain circumstances \u2013 particularly where the subcontractor attempts to recover against the general contractor\u2019s payment bond and the clause includes conditional payment or recovery language. Thus, due to the consequences of a no-damage-for-delay clause, it is important to know the terms of your contract and the law that governs your contract.<\/p>\n\n\n\n

Every two-front war cannot be avoided every time.  But there are certainly practical ways to reduce and minimize this risk.  And adopting some of these approaches can help you avoid a classic blunder (that did not quite make Vizzini\u2019s list).<\/p>\n\n\n\n

_____________________________________________________________________________<\/p>\n\n\n\n

See, e.g. J.A. Jones Constr. Co. v. Lehrer McGovern Bovis, Inc., 89 P.3d 1009, 1015 (Nev. 2004); Phoenix Contractors, Inc. v. General Motors Corp., 135 Mich. App. 787, 792 (Mich. App. 1995); White Oak Corp. v. Dep\u2019t of Transp., 585 A.2d 1199, 1203 (Conn. 1991); Dickinson Co., Inc. v. Iowa State Dept. of Transp., 300 N.W.2d 112, 114 (Iowa 1981); W. Eng\u2019rs, Inc. v. State By and Through Rd. Comm\u2019n, 437 P.2d 216, 217 (Utah 1968).
United States ex rel. Williams Elec. Co. v. Metric Constructors, 325 S.C. 129, 134 (S.C. 1997).
John E. Gregory & Son, Inc. v. A Guenther & Sons Co., 147 Wis.2d 298, 304 (Wis. 1988).
Corrino Civetta Constr. Corp. v. New York, 67 N.Y.2d 297, 310 (N.Y. 1986).
See Honeywell, Inc. v. J.P. Maguire Co., 1999 U.S. Dist. LEXIS 1872, at *69 (S.D.N.Y. Feb. 22, 1999).
See U.S. ex rel. Williams Elec. Co., 325 S.C. at 135.
Id. at 134.
See Bovis Lend Lease LMB, Inc. v. GCT Venture, Inc., 6 A.D.3d 228, 229 (N.Y. App. Div. 1st Dep\u2019t, 2004).
Corrino Civetta Constr. Corp., 67 N.Y.2d at 313.
Magco Elec. Contrs., Inc. v. Turner Constr. Co., 2009 U.S. Dist. LEXIS 24499, at *26 (D. Conn. March 26, 2009).
La. R.S. 38:2216(H).
Va. Code. Ann. \u00a7 2.2-4335(A); Colo. Rev. Stat. \u00a7 24-91-103.5.
N.C. Gen. Stat. \u00a7 143-134.
See Ohio Rev. Code. \u00a7 4113.62(C); Wash. Rev. Code. \u00a7 4.24.360; Ky. Rev. Stat. Ann. \u00a7 371.405(2)(c)
Wash. Rev. Code. \u00a7 4.24.360
See FAR 52.242-14 (Suspension of Work); FAR 52.242-15 (Stop-Work Order).
40 U.S.C. \u00a7 3131 et. seq.
United States ex rel. Kitchens To Go v. John C. Grimberg Co., 283 F.Supp.3d 476, 481-84 (E.D.Va. 2017).
40 U.S.C. \u00a7 3133(c).
U.S. ex rel. Kitchens To Go, 283 F.Supp.3d at 483.<\/p>\n","protected":false},"excerpt":{"rendered":"

Chris Broughton | ConsensusDocs Introduction: Under a no-damage-for-delay clause, the owner is not liable for any monetary damages resulting from delays on the project. In lieu of monetary recovery, the contractor\u2019s remaining remedy is a non-compensatory time extension. These clauses are common at the contractor-subcontractor interface as well. While no-damage-for-delay clauses are enforced in most… Continue reading No Damage for Delay? No Problem: Exceptions to the Enforceability of No Damage for Delay Clauses<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[14],"tags":[9895,538,505,8998],"class_list":["post-899282","post","type-post","status-publish","format-standard","hentry","category-construction-2","tag-advise-consult","tag-construction-delays","tag-delay-clause","tag-no-damages-for-delays","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nNo Damage for Delay? 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