A construction contractor was delayed in completing a road construction project by a flaw in the design provided by the project engineer.  The project owner (Broward County, Florida) denied the contractor’s delay and impact claim, asserting that it was barred by a contract provision entitled “No Damages for Delay.”  The courts held that to the extent that the delay was caused by bad faith or by interference with the contractor’s  work, the contractor was entitled to recover.

The clause in question reads as follows, with the first sentence in all capital letters: “No claim for damages or any claim other than for an extension of time shall be made or asserted against the county by reason of any delays.  The contractor shall not be entitled to an increase in the Contract Sum or payment or compensation of any kind from the County for direct, indirect, consequential, impact or other costs, expenses or damages, including but not limited to costs of acceleration or inefficiency, arising because of delay, disruption, interference or hindrance from any cause whatsoever, …; provided, however, that this provision shall not preclude recovery or damages by the Contractor for hindrances or delay due solely to fraud, bad faith or active interference on the part of the County or its agents.  Otherwise, the Contractor shall be entitled only to extensions of the Contract Time as the sole and exclusive remedy for such resulting delay, in accordance with and to the extent specifically provided above.”

During construction, the contractor “Triple R Paving, Inc.” discovered an alignment problem that prevented a major portion of the work from proceeding.  When it asked the County to permit it to move its manpower and equipment off the site until the problem was corrected the county directed it not to do so.  The work then progressed slowly and out of sequence.  Triple R was paid for all the work performed, but the county refused to pay for any of the inefficiency that was caused by the inability to get site access and complete the job in the time originally anticipated.

Triple R filed suit against the County.  The County sued its engineer as a third-party defendant under the indemnification clause of the contract between the engineer and the county.  The suit survived a motion by the engineer for a directed verdict against the contract on the basis of the No Damage for Delay Clause.  A jury then held in favor of the contractor as to certain of the delay damages.  On appeal, the engineer argued that the trial court should have granted its motion for directed verdict .

Although agreeing that generally clauses providing for no damages for delay are legal and enforceable, the appellate court found that in this case the facts surrounding the delay which resulted form the horizontal sight distance design flaw were sufficient to allow a jury to decide the question of fraud, bad faith, or active interference.

Evidence of the engineer’s “knowledge of the design flaw and the subsequent failure to apprise Triple R of the problem was sufficient, said the court, to constitute willful concealment of foreseeable circumstances which impact timely performance, such that the no damages for delay clause may be overcome.  The appellate court engineer responsible for the design flaw.”   In this case, the court said that the evidence established that the engineer was well aware of the design flaw in the bridge construction, but withheld that information from Triple R.  “Thus, there is sufficient evidence to allow a jury to determine whether fraud, bad faith, or active interference vitiated the no damages for delay clause.”

In related issues, the court held that the trial court committed reversible error in the written jury interrogatories.  The questions to jury used language inconsistent with the jury instructions that had been given at the end of the trial.  This had the serious potential to confuse the jury and prevent it from awarding the full extent of damages to which the contractor was entitled.   The damages at issue were those to be awarded pursuant to the Eichleay formula to a contractor who suffers unabsorbed home office overhead when the government delays work on the contract indefinitely but requires the contractor to remain available to resume work immediately on the government’s instruction.   The court reversed and remanded the case.  A new trial on the damages would apparently be required in order that a jury may consider a proper combination of instructions and interrogatories so that it may award appropriate damages to the contractor. Triple R. Paving, Inc. v. Broward County, 2000 WL 1584452 FL, 25 Fla. L. Weekly D2517 (Oct. 25, 2000).

NOTE: This case is somewhat unusual in that the contractor was able to successfully claim damages despite the no damages for delay clause.   Such clauses are generally enforced by courts.  In another recent case, for example (DiGioia Brothers Excavating, Inc. v. City of Cleveland, 734 N.W. 2d 438, 2000), an Ohio Court held that none of the exceptions to enforceability of a no damage for delay clause applied to the facts of the case since the contract actually addressed the specific cause of the delay.   The contract for installation of a water main noted hundreds of locations where there were interferences with subsurface utilities.  The contract also advised that there may be unmarked or inaccurately located utilities and it expressly disclaimed liability for delay that might result from such interferences.

Contractual language disclaiming responsibility for information or lack of information provided by an owner must be taken quite seriously by a contractor.  Contractors must not assume that a court will get them out of a contract because it ultimately looks unfair or produces an unfortunate loss for the contractor for matters beyond the control of the contractor.  The time to manage this risk is during contract negotiation.  Particular caution should be exercised when negotiating contracts with owners who have a history of writing  hard contracts that impose risks upon architects, engineers and contractors that are not generally encountered in the standard form contracts commonly used in the industry.

Copyright 2001, ConstructionRisk.com, LLC – Virginia

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 3, No. 3 (May/Jun 2001).