"No damages for delay" clauses are often used in construction contracts to restrict the contractor to only an extension of time for project delays and to prohibit claims for damages arising from delays in the completion of the project. Challenges to enforcement of this provision are common. Some states deal with this issue by common law, some by statute and others have not addressed the issue — West Virginia being one of those states. The following will discuss no-damages-for-delay clauses in Pennsylvania, Ohio and Virginia.
The general rule in Pennsylvania is that a no-damages-for-delay clause in a construction contract will be enforced, unless the party seeking to invoke the clause interfered in a positive or affirmative manner with the contractor's work or where there is a failure on the part of the party seeking to enforce the clause to act in some essential manner necessary to the prosecution of the work. The courts have granted exceptions to this rule where there has been "active interference" by the party seeking to invoke the clause.
The case that best illustrates this is Gasparini Excavating v. Pennsylvania Turnpike Commission, 409 Pa. 465, 187 A.2d 157 (1963). Gasparini Excavating Co. was awarded a contract to excavate an area that was to be used for a section of the Northeast Extension to the Pennsylvania Turnpike. The area had to be "slushed," or filled in, by a separate contractor before Gasparini could begin its work. Gasparini was ordered to begin work while the slushing was still going on, which resulted in denied physical access to where Gasparini needed to work, and the company was unable to begin work for several months.
The Pennsylvania Supreme Court held that the no-damages-for-delay clause was unenforceable because the Turnpike Commission failed to organize and administer the work according to the contract and by "interference with [Gasparini's] performance by its exclusion from the work site" after it was given notice to start operations.
Pennsylvania courts have also upheld the no-damages-for-delay clause. In Quinn Construction v. Skanska USA Building, 730 F.Supp.2d 401. Quinn Construction was hired to perform concrete work on a bioengineering research building at the University of Pennsylvania. The contract provided that Skanska (the construction manager hired by the university) was not liable to Quinn for damages caused by delays or disruptions to Quinn's work on the project. Quinn attested that the damages related to project delays were the result of interference by Skanska or failure on the part of Skanska to act in some essential matter necessary to the prosecution of the work. The court denied Quinn's request for summary judgment and ruled the no-damages-for-delay clause enforceable.
In 1998, Ohio enacted a statute titled, "Certain construction contract provisions void," R.C. § 4113.62, which made no-damages-for-delay clauses violative of public policy and unenforceable:
"Any provision of a construction contract, agreement or understanding, or specification or other documentation that is made a part of a construction contract, agreement or understanding, that waives or precludes liability for delay during the course of a construction contract when the cause of the delay is a proximate result of the owner's act or failure to act, or that waives any other remedy for a construction contract when the cause of the delay is a proximate result of the owner's act or failure to act, is void and unenforceable as against public policy."
The no-damages-for-delay clauses were upheld prior to the statute. Dugan & Meyers Construction v. Ohio Department of Administrative Services, 113 Ohio St. 3d 226, involved the construction of three buildings to be part of the Fisher College of Business of the Ohio State University. Dugan & Meyers was the lead contractor for the buildings.
The project was delayed by omissions, inaccuracies and conflicts in the design documents. Dugan & Meyers was discharged for failing to prosecute the work with the necessary diligence and a new contractor was hired. Dugan & Meyers sought payment for services rendered and in determining the amount due, OSU deducted the amount paid to the new contractor for completing the lead contractor duties. The contract was executed in 1997, prior to the 1998 statute barring no-damages-for-delay clauses. The court cited several cases from other states that have upheld no-damages-for-delay clauses and stated that "when a contract has an express provision governing a dispute, that provision will be applied; the court will not rewrite the contract to achieve a more equitable result."
In Cleveland Construction v. Ohio Public Employees Retirement System, Cleveland Construction Inc. (CCI) was contracted to build portions of a $90 million office tower on East Town Street in downtown Columbus, Ohio. The PERS was found at jury trial to have materially breached its contract with CCI by failing to properly schedule and coordinate the project's various tasks. CCI was awarded $640,298 in damages for the loss of efficiency caused by the PERS's breach. The PERS appealed.
The PERS argued that CCI asserted a claim for acceleration costs, not delay damages, and, therefore, the no-damages-for-delay clause was not applicable. To that argument, the court stated that although the statute did not specifically include the term "acceleration," acceleration costs are associated with project delay and the purpose of the statute was to prevent owners from escaping liability when they have caused a delay. The statute precludes liability for delay; the court went on to hold that the no-damages-for-delay clause in the contract was unenforceable.
No-damage-for-delay clauses in the context of public construction projects are statutorily prohibited by Virginia Code § 2.2 4335. That code provision states, "Any provision contained in any public construction contract that purports to waive, release or extinguish the rights of a contractor to recover costs or damages for unreasonable delay in performing such contract, either on his behalf or on behalf of his subcontractor if and to the extent the delay is caused by acts or omissions of the public body, its agents or employees and due to causes within their control shall be void and unenforceable as against public policy."
In Blake Construction/Poole & Kent v. Upper Occoquan Sewage Authority, 266 Va. 564, 587 S.E.2d 711 (2003), the Supreme Court of Virginia applied this statute to a contract dispute between a construction joint venture and public sewage authority. Under the terms of the construction contract, the sewage authority would not be liable to the joint venture for any damages associated with construction delay unless the delay was both unreasonable and a result of bad faith, malice, gross negligence or abandonment on the part of the authority.
Several issues arose during construction, and the joint venture ultimately filed a declaratory judgment action challenging the validity of the clause prohibiting damages for delay based on the language of Virginia Code § 2.2 4335. The public authority argued that the clause was enforceable because a majority of jurisdictions recognize bad faith, malice, gross negligence or abandonment on the part of the project owner as an exception to a clause barring damages for delay. The Supreme Court of Virginia was not persuaded by the public authority's argument:
"Code § 2.2 4335(A) means what it says: 'Any provision … to waive, release, or extinguish the rights of a contractor … shall.' The General Assembly's use of the inclusive and comprehensive term 'any' is instructive and mandatory. Without question, the provisions in General Condition 91.L of the contract waive, release and extinguish all unreasonable delay damages available to the contractor, the joint venture, unless the unreasonable delay is coupled with UOSA's bad faith, malice, gross negligence or abandonment of the contract. Such a contract provision contradicts the specific statutory prohibition of Code § 2.2 4335(A). If an expansion or constriction of the blanket prohibition found in Code § 2.2 4335(A) is to be created, that authority must come from the General Assembly and not the parties or the judiciary."
There are no cases from the Supreme Court of Virginia discussing the enforceability of no-damages-for-delay clauses in the context of private construction contracts. However, the U.S. District Court for the Eastern District of Virginia addressed such a clause in a private contract in McDevitt & Street v. Marriott, 713 F.Supp. 906 (E.D. Va. 1989) (overruled on other grounds). In that case, a contractor claimed that the project owner was responsible for certain construction delays and therefore liable to the contractor for damages despite a clause in the contract prohibiting such damages. The district court rejected the contractor's argument. While the McDevitt case states that no-damages-for-delay clauses in private contracts are enforceable under Virginia law, it can be argued that such clauses yield where the delay is caused by unreasonable, intentional or fraudulent conduct.
Eric J. Hulett leads Steptoe & Johnson's construction law team and has litigated and tried a variety of cases in state and federal courts. He focuses his practice in the areas of construction law, general litigation, professional liability and insurance coverage.
Caroline R. Mosites Kelly focuses her practice at the firm in the areas of construction and energy law.