There are few projects completed with no changes or additions to the original contract. Problems arise when the contractor fails to comply with the standard contract requirement for changes and extras to be in writing.
Equally problematic for contractors is the common contract clause providing for “no damage-for-delay”, which precludes delay claims by contractor.
In the recent case of ADC Contracting & Construction, Inc. v. Town of Southampton, the court ruled on the enforceability of contract provisions requiring written approval for change orders and extra work and the “no-damage-for-delay” clause.
ADC Contracting & Construction, Inc. contracted with the Town of Southampton, New York to construct an animal shelter. According to the contractor, the Town directed, and the contractor performed, extra work for which a written change order was never issued.
The contractor also claimed that the Town delayed the project by poor planning and scheduling. The Town acted as its own general contractor and entered into separate contracts with ADC, as the construction contractor, a plumbing contractor and an electric contractor. The contractor argued that the Town’s inexperienced representatives failed to supervise and coordinate the various trades, which resulted in interference and hindrance in the contractor’s ability to orderly and efficiently perform under the contract. The lack of supervision and coordination resulted in delays, as well as additional work, which increased the cost of the contract.
When the Town refused to pay for the extra work and the contractor’s delay claim, the contractor sued. The Town moved for summary judgment, arguing that the parties’ contract required all change orders and extras to be in writing, and that the contract barred the contractor’s recovery of any delay damages.
The court dismissed the contractor’s delay claims, but permitted the contractor’s extra work claims to proceed to trial. In making its decision, the court relied on the express terms of the parties’ agreement and the controlling case law. With regard to the contractor’s delay claim, the court noted that the contract stated: “Where Contractor is prevented from completing work due to a delay beyond his control, an extension of the time to complete the specific task shall be Contractor’s sole and exclusive remedy for such a delay.” The court went on to state that notwithstanding the owner’s poor planning and scheduling, inept administration of the project was within the scope of the no-damages-for-delay clause. Accordingly, the court dismissed the contractor’s delay claims, ruling that an extension of time to complete the work was the contractor’s only remedy for project delays caused by the owner.
As for the contractor’s extra work claim, the court referred to contract provisions requiring all changes to be first approved in writing. However, the court also pointed to case law which prohibited an owner from relying on such a provision to avoid payment if the absence of a written approval was caused by the owner.
The contractor submitted written correspondence with the owner and testimony from the Town’s representatives at their examinations before trial to raise factual questions as to whether the Town had actual knowledge of the contractor’s additional work claims and whether the Town, through the conduct of its agents, waived its right to insist upon strict compliance with the requirement of written authorization. Since the court was uncertain as to whether the absence of a written extra was caused by the owner, the court permitted the contractor’s extra work claims to remain.
Though there are limited exceptions, no-damages-for-delay contract clauses are frequently upheld and enforced by New York courts. Contract clauses that require extra work to be performed pursuant to a written change order prior to triggering an owner’s payment obligations produce differing results from the courts. On one hand, courts are sometimes hesitant to deny a contractor compensation for work verbally directed by the owner. On the other hand, courts may strictly enforce the requirement of a written authorization. The particular facts of a case will determine whether a court will allow a waiver of the written change order requirement. A prudent contractor should insist upon written approval before performing changes or extras, rather than risk a court’s enforcement of a contract requirement of a written authorization.