As a construction contractor, your work can be delayed for reasons beyond your control. If this happens, you want to know that you can recover your losses for additional labor, extended overhead, and other monetary damages. Would it surprise you to learn that you may have waived that right in your contract?
In the recent case of Plato General Construction v. Dormitory Authority of State of New York, appellate court enforced a no-damages-for delay clause against a contractor, rejecting a $10m delay claim. The contractor sought delay damages resulting from the alleged poor planning by the project owner and interferences by other contractors on the site. The trial court found in favor of the contractor, finding, among other, the following causes of delay:
- the owner failed to properly schedule and coordinate the work
- there was not an HVAC contractor on board at the time construction began
- the owner failed to coordinate the relocation of books from the library, which caused delays to the contractor’s work
- there were many design changes that were not communicated to other contractors, which caused delays
The appellate court reversed the trial court’s judgment because the parties’ contract contained a no-damages-for-delay clause, which provided:
“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.”
Although the contractor in Plato General Construction had contributed to some of the delays, this fact was irrelevant given the waiver of these types of claims in the contract above. The court concluded: "The contract specifically provided that [the contractor] could not sue the owner for damages resulting from the acts or omissions of other contractors. Further, since the contract provided for change orders, extra work, and acts or omissions by other contractors, such delays were, on their face, contemplated by the parties at the time they entered into the contract."
What it means? While there are some exceptions to the enforceability of such provisions depending on your jurisdiction, a standard no-damages-for-delay clause generally waives claims for additional compensation for delays on a project. You may be entitled to additional time, as specified by the contract, but the clause can absolutely prohibit claims for additional compensation.
What can you do? 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.