No damages for delay clauses, common in construction contracts, limit a contractor’s right to recover damages associated with construction delays beyond its control. While these clauses can lead to harsh results, exceptions to the no damages for delay clause have emerged to temper the financial implications.
Recognized exceptions allowing contractors to recover damages include cases of fraud, misrepresentation or bad faith, and when “active interference” by the owner or general contractor occurred. How can a contractor protect itself when it has been delayed by the active interference of the owner or another contractor? Active Interference
A typical no damages for delay clause may read: “In the event the contractor’s performance of this contract is delayed or interfered with by acts of the owner or other contractors, the contractor may request an extension of time for the performance of its contract, but shall not be entitled to any increase in the contract price or to damages or additional compensation as a result of such delays or interference.”
But what is active interference, and when does it nullify a no damages for delay clause? Colorado, the most recent state to consider the exception, held that active interference does not require any “bad faith” on the part of the owner or contractor. Rather, it only requires the contractor to show “that the defendant committed an affirmative, willful act that unreasonably interfered with the plaintiff’s performance of the contract, regardless of whether it was undertaken in bad faith.”
Other courts in Iowa, Michigan and New Jersey, however, held that to find active interference, the defendant must have committed some willful act in bad faith that unreasonably interfered with the contractor’s compliance with the contract.
The following are examples of active interference that have caused courts to ignore no damages for delay clauses.
- An earthwork subcontractor on a highway construction project claimed damages for delay against the general contractor based on its failure to properly schedule and coordinate the subcontractor’s project with other concurrent aspects of construction.
- A contractor (plaintiff) received formal notice to begin work, but the site was not available until nearly six months later because of work being performed by another contractor. The general contractor knew the other contractor would be occupying the area and preventing the plaintiff from performing its work.
- A general contractor ordered a subcontractor to proceed with steel fabrication despite the general contractor’s knowledge that the construction was delayed; the steel had to be stored outdoors before erection and required repainting at an additional expense.
Preserving an Active Interference Claim
Contractors can improve their chances of recovery in the face of a no damages for delay clause by keeping the following principles in mind during the course of a project.
Maximize Chances of Recovering Money
- Document, document, document. Record every delay or problem attributable to the general contractor, owner or other subcontractor. Judges and jurors are persuaded far more easily by what they can see and read than what they hear from a witness. Documentation should include dated, written descriptions and jobsite photographs. All versions of schedules and work orders should be retained to show modifications and deviations. In addition, keep any records showing the general contractor or owner was aware of improper conditions on the jobsite or other causes of delay. If the delay is caused by another subcontractor’s performance, the original schedule and any changes or late performance on the part of the behind-schedule subcontractor should be documented in writing, photographed and provided to the general contractor or owner.
- Written notice. Send written notice of the problems and delays to the owner or general contractor. If the general contractor demands that work proceed despite the problems, the documentation can help establish active interference and allow a contractor to maintain its claim for delay damages.
- Jobsite conditions. Any statements made in plans, schedules, contracts or correspondence that certain conditions would be in place when the work was to be performed will help show that the owner or general contractor failed to provide the conditions necessary to efficiently complete the work.
The active interference exception can limit the impact of a no damages for delay clause, but its application is uncertain because common delays are expected by the parties at the time they sign the construction contract. But contractors experiencing delays or problems due to an owner’s or general contractor’s conduct can maximize their chances of obtaining damages by carefully documenting problems. If a court finds that one of the parties to a contract actively interfered with another contractor’s work, the contractor should be allowed to recover delay damages despite an otherwise valid no damages for delay clause.