No-damage-for-delay clauses purport to place all the risk of construction delay with the contractor. These clauses typically disclaim any owner responsibility to the contractor for delay or disruption, regardless of the cause. The contractor waives the right to damages or increased compensation for delay. The contractor’s sole remedy is an extension of the performance period.
Project owners contend that delay disclaimers are a perfectly appropriate contractual allocation of risk. But on publicly bid contracts, with no opportunity for arm’s length negotiations, how much “allocation” is really taking place? The disclaimer is essentially forced upon the contractor. This has led to considerable hostility toward these clauses.
Some state legislatures have declared no-damage-for-delay clauses void under certain circumstances. Courts narrowly construe the clauses in order to limit their enforceability. In one recent case, a New York court allowed a contractor to pursue a delay claim despite a broad delay damages disclaimer in the public contract and despite the contractor’s alleged failure to provide timely written notice of claim under the contract. The claim was treated as extra-contractual.
I invite your comments on no-damage-for-delay clauses. Are these legitimate allocations of risk under the contract? Or are they onerous and one-sided? In light of judicial hostility to the clauses, can project owners have any confidence the clauses will even be enforced?
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Bruce Jervis, Esq., Senior Editor
Construction Claims Advisor
