Delays are rather commonplace in the construction industry. As a result, “no-damages-for-delay” clauses are commonplace in construction contracts as well. Because these contractual provisions are considered a bargained for benefit of the contract, courts are loathe to apply one of the four narrow exceptions to the clause. Yet another example of a court declining to apply one of the exceptions is found in the recent case of Federated Fire Protection Systems Corp. v Extell West 57th Street, LLC.
In 2010, Federated Fire Protection Systems entered into a contract with Extell West 57th Street to furnish and install the fire sprinkler system at the One57 multi-use condominium, a supertall skyscraper in Midtown Manhattan. In furtherance of its work, the contract provided that Federated would have access to all three elevator hoists which were servicing the project, and Federated scheduled its work (and agreed upon its completion date) accordingly.
Ultimately, Federated was provided access to only two of the three agreed upon hoists. As a result, Federated was delayed in completing its work, and it sued Extell to recover monetary damages resulting from the delay. Extell moved to dismiss based on the no damages for delay clause. Federated argued that it was entitled to the benefit of the judicially crafted exception based on the owner’s breach of a fundamental contractual obligation.
The motion court granted the motion to dismiss, finding that the no damages for delay clause was a bargained for provision of the contract, and that by including such a provision the parties both anticipated delays and agreed that the remedy for such delays would only be an extension of contract time. As to the claimed exception, the motion court held that it was not appliable because the owner provided access to hoists. On appeal, the appellate court affirmed, finding that the allegation that the owner only provided access to two of the three hoists, alone, was not sufficient to establish the breach of a fundamental contractual obligation. In doing so, the appellate court contrasted cases where the owner completely failed to provide access, etc., required by the contract.
The harsh consequence of a no damages for delay provision is that the contractor or subcontractor must absorb all of its monetary damages arising out of delays caused by others. They generally do not have the bargaining power to change or delete the oppressive language of the no damages for delay clause when initially negotiating the contract. Here, the court once again reminds us that the exceptions to the enforceability of a no-damages-for-delay clause are extremely limited—even where the owner’s breach and the impacts of that breach are so clear and easily determinable. It is difficult, but not impossible to argue around such clauses. 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.