Beware of No Damages for Delay Clauses

It is common for construction contracts to state that, if the project is delayed by the owner, the contractor shall be entitled to an extension of contract time but will not be entitled to any addition compensation.  Such a contract provision is known as a “no damages for delay” clause.  The Connecticut Supreme Court has held that “‘no damages for delay’ clauses are generally valid and enforceable and are not contrary to public policy. [unless]: (1) [the] delays [are] caused by the [owner’s] bad faith or its willful, malicious, or grossly negligent conduct, (2) [the delays] uncontemplated …, (3) [the] delays so unreasonable that they constitute an intentional abandonment of the contract …, and (4) [the] delays [result] from the [owner’s] breach of a fundamental obligation of the contract.  White Oak Corp. v. Department of Transp., 217 Conn. 281, 288-89, 585 A.2d 1199, 1203 (Conn.,1991).  The list of exceptions; however, may not actually be that broad.  In a recent decision, the Superior Court analyzed the applicability of the aforesaid exceptions to a typical “no damages for delay” clause.

In C & H Elec., Inc. v. Town of Bethel, an electrical contractor was substantially delayed because of the additional asbestos abatement work that was required.  C & H Elec., Inc. v. Town of Bethel, 2012 WL 2899314 (Conn.Super.), 2 (Conn.Super., 2012).  In C & H Elec., Inc., the trade contractor was presented with original and revised CPM schedules that indicated that the abatement work would last 112 days and 188 days respectively.  Id.  Based upon the original and revised CPM schedules, the trade contractor anticipated that the asbestos abatement work, which was being performed by a contractor under a separate agreement with the owner, would be almost completed before it started its work but the asbestos abatement ended up lasting 1048 days.  Id.  “As a result of the abatement operation, the plaintiff was required to return to work areas multiple times and to move constantly its equipment around the building.  Additionally, new crews had to learn the work that had become familiar to other crews.”  Id. at 3.  The additional asbestos abatement work certainly impacted the trade contractor’s schedule and increased its costs but the trial court held in favor of the owner based upon the contract’s “no damages for delay” clause.  Id.

At trial, the trade contractor argued “that the delays on the project arose from the [owner’s] wilful misconduct and/or gross negligence, arose from the [owner’s] active interference and are a result of unanticipated abatement.  It further argue[d] that the ‘no damages for delay’ clause [was] unenforceable because the [owner] breached a fundamental obligation in the contract.  Id.  Nonetheless, the court enforced the “no damages for delay” clause because the court did not find “active interference” by the owner.  Id.

In C & H Elec., Inc., the contract expressly listed the delays the owner could cause without being liable for monetary damages.   Instead of enforcing the full list of exceptions to a “no damages for delay” clause, the court said “[w]here there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law.”  Id. at 5
“Courts do not unmake bargains unwisely made.  Absent other infirmities, bargains moved on calculated considerations, and whether provident or improvident, are entitled nevertheless to sanctions of the law.  Although parties might prefer to have the court decide the plain effect of their contract contrary to the agreement, it is not within its power to make a new and different agreement; contracts voluntarily and fairly made should be held valid and enforced in the courts.”  Id.  Thus, the court refused to grant the trade contract delay damages – despite the owner’s wrongful acts – because the subject agreement allowed the owner to delay the work in that manner.

In light of the foregoing, the exact wording of a “no damages for delay” clause is extremely important.

If you have any questions about drafting an agreement or the meaning of a contract you have been asked to sign, please give me a call.

Scott Orenstein
(203) 640-8825

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