Last week during family skate night, my daughter asked me for two quarters to play some Skee-Ball. I loved playing that game as a kid. But imagine my surprise when I turned the corner and witnessed her active interference with the rules of the game! (… Truly, you can’t script this stuff…)
In construction contracts, “active interference” is a recognized exception to the enforcement of what is known as a “no damages for delay” clause. This type of provision seeks to preclude any increased costs associated with delays on the project. For example, a traditional clause may read as follows:
“No claims for increased costs, charges, expenses or damages of any kind shall be made by the Contractor against the Owner for any delays or hindrances from any cause whatsoever; provided that the Owner, in the Owner’s discretion, may compensate the Contractor for any said delays by extending the time for completion of the Work as specified in the Contract.”
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“Should the Contractor sustain any damage through any act or omission of any other contractor having a contract with the Owner or through any act or omission of any Subcontractor of said other contractor, the Contractor shall have no claim against the Owner for said damage.”
In the a regularly cited case, United States Steel Corp. v. Missouri Pacific Railroad Company, 668 F.2d 435 (8th Cir. 1982), the court recognized that “no damages for delay” clauses are valid, but that there are numerous exception to the rule. In that case, the Owner issued a notice to proceed to the bridge superstructure contractor with knowledge that substructure work would not be completed on schedule. As a result, superstructure contractor was delayed for 170 days while waiting for access to work site. The contract contained a “no damages for delay” clause specifically making reference to delays caused by substructure contractor.
In the end, the court recognized that “no damages for delay” provisions are generally enforceable except as to delays: (1) not contemplated by the parties under the provision; (2) amounting to an abandonment of the contract; (3) caused by the owner’s bad faith; or (4) amounting to active interference. Since the Owner issued the notice to proceed with knowledge of the substructure delays, the Court concluded that the Owner was guilty of active interference. Accordingly, the superstructure contractor was entitled to recover on its delay damage claim.
Lesson Learned. The real lesson is to make sure to review your contract for these types of provisions and try to negotiate the terms. For example, the AIA A201 expressly provides that the owner and contractor may seek damages from each other in the event of a delay caused by the other party. There will be certain notice and substantiation requirements, but it is common to allow a party to seek damages for delay. If an owner is unwilling to remove a no-damages-for-delay clause in your contract, then you should try to limit its application to certain delays such as delays caused by others, leaving the owner liable for its own delays.