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A state court in California declined to enforce a “no-damage-for-delay” clause that would have deprived a construction contractor of equitable adjustment for time delays and expenses caused by the project owner, City of Los Angeles. The city had superior knowledge concerning site conditions which it withheld from the bidders. The city also impeded access to the site.

In its Invitation for Bids (IFB), the city advertised for bids for the rehabilitation of the Venice Canals. This work included excavation of material on the bottom of the canals and the disposal of that material. The city learned while the IFB was still pending that the material on the floor of the canals was contaminated with pollutants and could not be disposed of in unclassified landfills as previously anticipated. The city also learned that work at part of the site would be prohibited by federal agencies during the months of April through September due to nesting terns.

In response to what it learned about the site, the city issued a revision to the IFB stating: “The construction stages may be interchanged to suit the requirements of any permitting agency or as directed by the City.” The bidders were not expressly advised by the city, however, concerning the information that had become available to the city. In the contract that was awarded to the low bidder, G. A. MacDonald Construction Co., Inc., the terms and conditions provided that the city would not be liable for any delay damages other than for “unreasonable and unanticipated delays caused by the public agency.” This was an exception mandated by California Code, section 7102.

Work on the contractor’s critical path was delayed for four months because after the city issued the notice to proceed, the city was unable to obtain a disposal permit for the excavated materials for another four months. When the contractor filed a delay claim, the city asserted the “no-damage-delay” clause barred recovery. In deciding this matter, the California Court of Appeal concluded that the contractor was entitled to damages because the clause barring them was unenforceable pursuant to the exceptions stated in the statute.

According to the court, the city withheld superior knowledge concerning the contamination and site access. The inclusion in the addendum to the IFB to permit the city the general right to “interchange” the construction stages was not sufficient to give the bidders notice of the conditions or the impact that these conditions could have on the schedule. Because the city had caused unreasonable, unanticipated delay, the damage disclaimer was unenforceable. Howard Contracting, Inv. V. G.A. MacDonald Construction Co., Inc. , 83 Cal. Rptr. 2d 590 (Cal. App. 2 Dist. 1999).

Article Copyright  1999, 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. 1, No. 4 (July 1999).