Claims for additional compensation are sometimes limited, by statute or contract clause, to the direct cost of contract performance. This is typically labor, materials and equipment furnished to the project. A Colorado court was recently presented with a situation where an unpaid subcontractor included contested, unliquidated delay damages in its claim.
The state public works statute allows unpaid subcontractors to put a hold on undisbursed contract funds held by the public project owner, but the hold is limited to amounts due for labor, materials and supplies. The subcontractor included delay impact damages, including lost profit and idle equipment, in its verified statement of claim. Under the statute, this was excessive and the entire amount of the claim—including permissible costs—was forfeited.
The second case in this issue also involves a subcontractor seeking delay damages. A federal appeals court, applying New York law, ruled that a 19-month delay was not uncontemplated and did not constitute abandonment of the subcontract. A no-damage-for-delay clause in the subcontract was enforceable against the sub.
The third case involves the application of a contract’s arbitration clause to a claim against the performance bond on that contract. Although the surety was arguably not a party to the arbitration agreement, it stepped into the shoes of its bonded contractor when it undertook completion work without a takeover agreement.
