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ConstructionPro Week, Volume: 1 - Issue: 20 - 09/18/2012

Are No-Damage-for-Delay Clauses Regaining Credibility?

By Bruce Jervis

 

No-damage-for-delay clauses produce such harsh consequences that they have long been viewed with skepticism by the courts. Starting with the premise that these disclaimers must be strictly construed against the drafting party, courts have carved out numerous exceptions to their enforceability: active interference, bad faith, material breach of contract, unforeseen delay, delay of unreasonable duration, the list goes on.

 

The exceptions to enforceability are so prevalent that many consider no-damage-for-delay clauses to be of limited effectiveness. Two recent cases call that point of view into question. Last week, we reported on a case out of Illinois where a clause was enforced. Illinois law does not recognize “active interference” as an exception to enforceability. And the facts didn’t support the contention that the delay had been unforeseeable or of unreasonable duration.

 

Now a Texas court has enforced a delay damage disclaimer even though the delay was caused by the project owner’s material breach of contract. The clause was worded so strongly that it applied to delay caused by fault of any kind on the part of the owner. The court said it could not superimpose exceptions on such clearly worded contract language.

 

What is your opinion? Are no-damage-for-delay clauses so compromised by the numerous exceptions to enforceability that they are ineffective? Or are they regaining credibility and to be taken at their word? I welcome your comments.

 

COMMENTS

The Texas case is very interesting.........I would like to see the exact wording that was in the contract that was so strong it denied exceptions.
Posted by: Don Godi - Wednesday, September 19, 2012 5:28 PM


California courts have developed a large body of law that would preclude enforciability of such language no mattr how strongly and clearly worded. Also, statutory law in State Public Works contracts precluude no daqmage for delay clauses.
Posted by: Ronald H. Kahn - Wednesday, September 19, 2012 5:42 PM


In my opinion, the main thrust of the delay damage waiver is to preclude contractor claims for consequential damages resulting from such things as lost opportunity, home office overhead, etc. I don't see that this is so harsh. Our provision says, among other things, that the contractor's sole remedy for delays caused by such things as cardinal change in scope by the owner is an extension of time, but not money damages.
Posted by: newman - Thursday, September 20, 2012 7:56 AM


Does anyone have the citations for these cases?
Posted by: Nicholas Zaita - Thursday, September 20, 2012 9:36 AM


I think the key point is "enforceability".

While some developed nations and even totalitarian regimes have evolved/adopted a legal system which delivers timely judgements in a finite time frame, it does not hold good in many so called democratic countries where the legal system can delay the judgements for decades. In such a situation, even if the the case comes up for court's adjudication, it becomes unenforceable in the true sense of the term, therby almost killing the enterprise.
Posted by: Vinod Nakra - Friday, September 21, 2012 4:35 AM










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