No-damage-for-delay clauses are common in construction contracts, but are they enforceable? The one-sided nature of these “exculpatory” clauses has caused courts to view them with a jaundiced eye. Several well-recognized exceptions to enforceability have been carved out in recent decades. Yet the clauses continue to appear in prime contracts and subcontracts alike.
A recent case illustrates that delay disclaimers can be enforceable when carefully drafted. A prime contractor detailed the risks presented to a subcontractor on a particular project: numerous subcontractors, coordination and interference issues, out-of-sequence work, recurring schedule revisions, compression and acceleration of the work. The subcontract then expressly assigned these risks to the subcontractor and disclaimed any liability on the part of the prime contractor. A federal appeals court said it doubted any reasonable jury could find an applicable exception to enforceability. No-damage-for-delay clauses are not always taken seriously in the contracting community. There is a belief that they are frequently unenforceable. Yet this recent case shows that careful draftsmanship, as opposed to off-the-shelf boilerplate language, will make these clauses enforceable even in jurisdictions that recognize numerous exceptions.
I invite your comments below on no-damage-for-delay clauses. Are they fair? When should they be used and how should they be drafted?
Featured in next week's Construction Claims Advisor
- Sub Should Have Alerted Prime to Pre-Existing Safety Hazard
- Split Decision Rules Design Conflict “Patent”
- Contractor Did Not Give Sub Reasonable Opportunity to Complete Work
Bruce Jervis, Editor
Construction Claims Advisor