New York courts generally enforce the no-damages-for-delay clauses found in many public work contracts and some private construction contracts. This provision prevents a contractor or subcontractor from recovering monetary damages for delays that occur on a construction project. However, there are certain exceptions to the enforceability of a no-damages-for-delay clause. One of the exceptions is where the delay was not contemplated by the parties at the time they entered into the contract.
In the recent case of N.J.D. Wiring & Electric, Inc. v M.A. Angeliades, Inc., the court denied the general contractor’s motion to dismiss the subcontractor’s delay claim, ruling that there was a triable issue as to whether the delay claim falls within the exception to the enforceability of a no-damages-for-delay clause.
M.A. Angeliades, a prime contractor, entered into a contract with the New York City School Construction Authority to perform general construction work at a school in Brooklyn. On January 12, 2007, Angeliades entered into a subcontract with NJD Wiring and Electric whereby the subcontractor would perform the electrical scope of Angeliades’ work. The subcontract required that NJD was to commence work on or about January 2007 and complete the work within 24 months. The subcontract incorporated Angeliades’ prime contract and contained a standard no-damages-for-delay clause which prohibited monetary claims for delay and provided that the contractor would be fully compensated by an appropriate extension of time to complete the work.
NJD was prevented by no fault of its own from commencing work on the Project until eleven months after the expected start date. According to NJD, the delays were caused by several factors which had absolutely nothing to do with NJD’s scope of work. NJD submitted the appropriate requests for an extension of time pursuant to its contract, but these requests were denied. Instead, Angeliades required NJD to complete its work in the remaining 13 months, which it did. NJD thereafter incurred substantial additional expenses totaling $1,984,039 necessitated by its expedited completion of its work within the 13 month period. The additional expenses included additional costs for labor wages, overtime and site supervision, extended general conditions and additional costs.
In April of 2008, Angeliades submitted a change order to the School Construction Authority seeking to recover its own acceleration costs as a result of the unforeseen delays, which was paid by the SCA. In December of 2009, NJD submitted a request for equitable adjustment seeking payment for its acceleration costs. NJD’s request was denied by the SCA on the grounds that all acceleration costs relating to the delay had already been paid to the prime contractor Angeliades under the April 2008 change order.
NJD commenced an action against Angeliades and its payment bond surety, for breach of the subcontract. Both Angeliades and the bond surety moved to dismiss NJD’s lawsuit, relying on the no-damages-for-delay clause in the subcontract. NJD opposed the motion, arguing that the delays were uncontemplated as evidenced by the SCA’s payment to Angeliades for delay damages, notwithstanding the no-damages-for-delay clause in its own prime contract.
The court agreed with the subcontractor, finding that delays which were not foreseeable by the parties at the time of the contract are compensable even in the presence of a no-damages-for-delay clause, and that the issue of whether these delays were uncontemplated could not be determined without further pre-trial discovery. The court noted, however, that there was an identical no-damages-for-delay clause in Angeliades’ prime contract, for which Angeliades received compensation for its own delay costs, but Angeliades denies NJD damages for the same delay.
In my Attorney’s Column of two months ago, I reported that New York City revised its standard contract to eliminate the no-damage-for-delay clause and allow claims against City agencies for delay and related costs under certain circumstances. This case arose before the City eliminated the no-damage—for-delay provision. Under the current revised City contract, it appears that the subcontractor would have satisfied the criteria for compensable delays.