New York courts continue to rigidly enforce the "no-damages-for-delay" contract clause against contractors, which bars contractor delay claims. This clause is found mostly in public works contracts. The courts, however, have recognized certain exceptions to enforceability of a no-damages-for-delay provision.
The clause may not be invoked to bar damages for (1) delays caused by bad faith or willful, malicious or grossly negligent conduct; (2) delays not contemplated by the parties when they entered into the contract; (3) delays resulting from the breach of a fundamental obligations of the contract; and (4) delays so unreasonably that they constitute an intentional abandonment of the contract.
In the recent case of LoDuca Associates, Inc. v PMS Construction Management Corp., the appellate court demonstrates the difficulty faced by a contractor in seeking to persuade the court that the delay falls within one of the four recognized exceptions to the enforceability of a no-damage-for-delay clause.
LoDuca entered into a $3.8 million contract with the New York City Department of Design and Construction for the construction of the New Aquatic Animal Medical Facility at the New York Aquarium. As the project progressed, major design revisions were undertaken (which LoDuca blamed on an improper initial design), and 111 change orders were issued. These change orders resulted in a $1.2 million increase in the contract price, as well as a delay of 27 months.
After the completion of the project, LoDuca commenced suit seeking to recover damages arising out of the 27 month delay. The defendant, who was the City’s construction manager, moved to dismiss the claim based upon the presence of a no-damages-for-delay clause in the contract.
The trial court dismissed the contractor’s delay claim, finding that the contract contemplated that delays resulting from "any act, neglect or default of the Construction Manager, the Owner, the Architect, another contractor or subcontractor or by any cause acknowledged by the Contractor to be beyond the control of the Subcontractor", and that "since a defective design arises from an act of the owner and architect, this provision must be read to prohibit claims for damages on that basis".
The appellate court agreed, finding that the design defects "constitute merely inept administration or poor planning which does not negate the application of the no damages for delay provisions". The court also rejected the argument that the 27 month delay was so unreasonable that it went beyond the contemplation of the parties when they signed the contract. According to the court, the length of the delay is relevant to whether an exception to the no damage for delay clause may apply, but held that "the length of the delay does not transform a delay caused by an event specifically contemplated by the no damages for delay clause into something uncontemplated". In doing so, the appellate court cited one of its prior decisions where it held that a 32 month delay was contemplated.
The court here reaffirms its rigor in upholding no damages for delay clauses by claiming that delays of 27 months and 32 months - nearly three years - are specifically contemplated by the contract. Clearly, contractors do not enter into construction contracts contemplating that the job will be delayed by years. However, under these latest court decisions, one is left to wonder whether under similar factual circumstances, a delay of any length can be found to be an uncontemplated delay.