Construction delay claims are one of the most common causes of construction litigation. Delays can have devastating economic effects on both owners and contractors. Owners seek to protect themselves from paying damages for delays on a project by including a “no-damages-for-delay” cause in the construction contract. This provision is enforceable by the courts.
New York courts have recognized certain exceptions to the enforcement of a no-damages-for-delay clause. The exceptions are: (1) delays caused by bad faith or willful, malicious or grossly negligent conduct; (2) uncontemplated delays; (3) delays so unreasonable that they constitute an intentional abandonment of the contract; and (4) delays resulting from the breach of a fundamental obligation of the contract.
The recent case of Advanced Automatic Sprinkler Co., Inc. v Seaboard Surety Co., a court ruled on the enforceability of a no-damages-for-delay clause where there was a 22 month delay.
In June of 2001, Dart Mechanical Corporation, a prime HVAC contractor, entered into a contract with the New York City Department of Sanitation to refurbish two separate garages in Brooklyn. Thereafter, in June of 2002, Advanced Automatic Sprinkler Co., Inc. entered into a subcontract with Dart to install automatic sprinkler systems in the two garages. The subcontract contained a no-damages-for-delay clause which provided that Dart would not be liable to Advanced for any damages “resulting from delays, accelerations, inefficiencies, variations in the scope, schedule or sequence of the WORK”. The contract also provided that “DART shall have the right, at any time …. to modify progress schedules to accelerate, delay or vary any sequence of the WORK, in whole or in part”. It was not disputed that the entire project, including Advanced’s scope of work, was delayed by 22 months because: the owner failed to eject the previous owner, who held over in possession of the property; contaminated soil was encountered; the electrical contractor failed to perform its own scope of work; and the owner’s engineers made design errors in the sprinkler system Advanced was to have installed.
Advanced commenced a lawsuit against Dart’s payment bond surety, Seaboard Surety Company, to recover damages for the delay. Seaboard moved for summary judgment arguing, in part, that the no-damages-for-delay clause barred the delay claim because the delays were contemplated by the parties at the time the subcontract was entered into and they were referenced in the subcontract.
The court agreed with Seaboard and dismissed Advanced’s delay claim. In doing so, the court found that “the categories of delay alleged in the complaint—denial of access to the Project site, flawed design, failure to adhere to or properly coordinate the progress schedule, delays due to the work of another (the electrical) prime contractor—are all delays within the scope of the contractual provisions.” The court further distinguished cases in which other courts denied enforceability of the no-damages-for-delay clause by noting that the contracts in the distinguishable cases did not have language which was as broad and comprehensive as the language contained in the Dart-Advanced subcontract.
Here, the court once again reminds us that the exceptions to the enforceability of a no-damages-for-delay clause are extremely limited—particularly where the clause is comprehensive and sets forth a list of situations where a delay is contemplated. Given that each case is necessarily limited to its own facts, it is important to consult with an attorney early in the process so that the claim can be properly analyzed and documented. In doing so, it may be possible to avoid the result suffered by Advanced.