By Bruce Jervis
Project owners, both public and private, frequently contractually disclaim liability for costs caused by delay and disruption, regardless of the cause. These no-damage-for-delay clauses can have serious financial ramifications for contractors. As one-sided exculpatory clauses, they are narrowly construed by the courts, which have carved out several exceptions to their enforceability.
The most controversial exception is “active interference” by the project owner with the contractor’s means or methods of construction. What does this mean? What makes interference active?
The North Dakota Supreme Court recently defined this term as precisely as possible. Active interference requires something more than an error of judgment, a lack of effort, or administrative incompetence on the part of the project owner. It does not require bad faith or reprehensible conduct by the owner.
Active interference occurs when an owner’s willful, affirmative act alters the contractor’s performance. For instance, a directive to erect steel out of sequence in an effort to enhance the appearance of progress on the project was active interference.
Does this definition make the exception predictable and workable? Is it too narrow? Should all owner interference of any kind negate the enforceability of no-damage-for-delay clauses? I welcome your comments.