Signing Away Delay Damages

Despite the inclusion of a “no damages for delay” clause in a construction contract, parties to the contract may still be able to recover for damages they incur as a result of project delays. While various parties include such clauses in a contract as protective measures, they may still be liable for damages based on their share of fault in the delay of the completion of the work.

Corinno Civetta Constr. Corp. v. City of New York, 67 N.Y.2d at 309, 502 N.Y.S.2d (2010) provides that even with such a clause, damages may be recovered for: (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 by the contractee, and (4) delays resulting from the contractee’s breach of a fundamental obligation of the contract.

Based on the established exceptions to the “no delay for damages” clause, the Court found for the defendant in Blue Water Environmental Inc. v. Incorporated Village of Bayville, 44 A.D.3d 807843 N.Y.S.2d 681 (2007). The plaintiff in this case entered into a contract with the defendant to dredge a marina. Subsequent to this agreement, the New York State Department of Conservation prohibited such dredging for a period of four months to protect the wildlife within the marina. The following months were plagued by freezing weather and the New York State Department of Conservation then modified the Village’s dredging permit to prohibit dredging once again, forcing plaintiff to stop doing work. All of this resulted in the plaintiff not resuming the dredging until almost a year after the start date. The plaintiff then commenced an action to recover delay damages, which it alleged consisted of out of pocket expenses, lost profits and the cost of certain extra work. The Court found in favor of the defendant, holding that “the ‘no claim for delay’ clause of the parties’ contract exculpated the Village from liability for damages resulting from delays “in commencement, performance or completion of the Contract, regardless of whether said delays are, or may be caused by the Owner, Engineer or any governmental agency” and that “that provision was valid and enforceable and was not contrary to public policy”. The reasoning for the plaintiff’s loss is that it failed to show that the delays were unanticipated and directly caused by the defendant’s willful and malicious conduct.

Accordingly, signing off on a contract that provides for “no delay damages” does not automatically bar the plaintiff from recovery for such damage. However, factors that prevent the completion of work such as bad weather and relevant statutes being modified in the midst of the project may not warrant a plaintiff’s entitlement to delay damages. Plaintiffs may still succeed in an action for delay damages against a party to the contract who, by their willful and malicious conduct causes unanticipated delays and resulting delay damages, when the delays were not contemplated at the time of contract, when the delays were so unreasonable that they constitute an intentional abandonment of the contract, or when the delays resulted from breach of a fundamental obligation of the contract. If a potential delay claim arises, it is strongly recommended that the parties immediately consult with legal counsel who can coordinate with delay claim construction professionals to properly document and preserve the claim. Both owners and contractors should be aware that delay claims are often difficult, expensive and time consuming claims but, in certain instances, are necessary in the construction industry.

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