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A no-damages-for-delay clause was held to prevent a contractor from recovering damages for delays even where there was evidence that poor planning and administration by the project owner contributed to delay and there was evidence that work by other contractors adversely impacted the schedule.  This case involved a suit by a contractor against the Dormitory Authority of New York for over $10 million.  The Authority countersued the contractor for $179,000.  Following a bench trial, the trial court awarded judgment in favor of the contractor in excess of $10 million, with the judge finding that the Authority breached the contract by failing to fulfill its duty of scheduling and coordinating the work, failing to have an HVAC contractor in place at the beginning of the project, failing to notify the other contractors of a redesign of the HVAC system that delayed the work, failing to remove all books from the library so the contractor could work, and delaying full access to the project site for several months later than promised. The court found uncontemplated delays were incurred by the contractor but that the contractor was also responsible for some of the delay.  This judgment was reversed on appeal – with the contractor getting nothing and the Authority being awarded $179,000.  The appellate court held that the trial court erred in failing to enforce the no-damages-for-delay clause of the contract. Plato General Construction v. Dormitory Authority of State of New York, 89 A.D. 3d 819, 932 N.Y.S. 2d 504 (Supreme Ct Appellate Div., 2nd Dept., 2011).

The relevant language of the contract was explained by the court to be the following:

 Section 13.01(A) of the “General Conditions” of the contract provided:

 “During the progress of the Work, other contractors may be engaged in performing work. The Contractor [Plato] shall coordinate the Contractor’s Work with the work of other contractors in such a manner as the Owner may direct.”

 Section 11.02 of the “General Conditions” contained a no-damages-for-delay clause which stated:

 “No claims for increased costs, charges, expenses or damages of any kind shall be made by the Contractor against the Owner for any delays or hindrances from any cause whatsoever; provided that the Owner, in the Owner’s discretion, may compensate the Contractor for any said delays by extending the time for completion of the Work as specified in the Contract.”

Section 13.01(D) provided:

“Should the Contractor sustain any damage through any act or omission of any other contractor having a contract with the Owner or through any act or omission of any Subcontractor of said other contractor, the Contractor shall have no claim against the Owner for said damage.”

 Section 20.15 provided that Plato could not cancel the contract based upon DASNY’s breach thereof, and waived “any and all rights and remedies to which” Plato “might otherwise be or become entitled to because of any wrongful act or omission” of DASNY, except Plato’s right to damages.  Provisions were made in the contract for changes and extra work.

 Delays in the project were attributed to a number of causes. Consolidated Edison Company (hereinafter Con Edison) was installing “chiller lines” to run alongside the site; installation was to take 30 days, but was not completed for six months, interfering with demolition and construction for at least some of that period. Although the contract provided that Plato would have “[c]omplete access to the site after June 1999,” the library was not completely vacated until October 5, 1999. The contract for heating, ventilation, and air conditioning (hereinafter HVAC) was not awarded until August 19, 1999, but the selected HVAC contractor, Precision Mechanical, Inc. (hereinafter Precision), was removed from the project on December 6, 1999, by mutual agreement, because it could not meet deadlines or provide a schedule for its portion of the project. Precision was replaced in January 2000 with Roy Kay, Inc. (hereinafter RKI).

 RKI had to provide drawings redesigning the duct work system because the original design based upon DASNY’s engineer’s drawings was not sufficient to maintain sufficient airflow through the buildings and was not field-verified as to the height of existing beams. Plato claimed that the plans prepared by DASNY’s architect were also defective for failing to identify all of the asbestos in the walls, resulting in additional asbestos abatement work which delayed demolition.

 Completion of the project was delayed by Plato’s failure to complete brickwork in a timely manner, as well as the fact that Plato’s subcontractors would not or could not complete their work, requiring Plato to perform much of the interior finishing work itself. Occupancy of the library was not turned over to Brooklyn College until August 28, 2002, 526 days after the contract completion date of March 20, 2001.

Based on the above description of the contract, the trial court found that the contractor was responsible for some delay due to errors in masonry work, and failure of its subcontractors to complete their tasks on time, and concluded that the Authority was responsible for 66% of the 526-day delay and the contractor was responsible for the remaining 34% delay (179 days).   On appeal, however, the appellate court held that regardless of who caused the delay, the contractor was not entitled to delay damages.  The court said the purpose of the no-damages-for delay  clause is to “extend acceptability to a range of unreasonable delay” by the [project owner] and that “the clause exonerates the defendant for delays by inept administration and poor planning.”  Although such a clause will not bar recovery where the delays are caused by bad faith or willful, malicious, or grossly negligent conduct, or uncontemplated delays, or delays so unreasonable that they constitute an intentional abandonment of the contract by the project owner, the court found no evidence of any such causes of delay in this case.

Moreover, the court concluded that the contract specifically provided that the contractor could not sue the owner for damages resulting from acts or omissions of other contractors and that such delays were contemplated by the parties in any event  and were not recoverable.  Even faulty performance and defaults under contractors’ contracts were deemed by the court to be within the contemplation of the parties.  For these and other reasons, the court reversed the trial court decision, and held in favor of the project owner against the contractor.

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. 14, No. 6 (June 2012).

Copyright 2012, ConstructionRisk.com, LLC