A no-damages-for-delay clause can bar contractor claims for additional costs a contractor incurs due to delay on a project. Such clauses can be controversial, and at least one state—Virginia—has enacted a statute limiting the use of no-damages-for-delay clauses on public construction projects.

Regardless, many courts will enforce a no-damages-for-delay clause. But there can be exceptions to the enforcement of such clauses.

One of the most common exceptions is where the party seeking to enforce a no-damages-for-delay clause actively interferes with the other party’s completion of its work. A Florida federal court recently considered the active-interference exception in a dispute between a general contractor and a subcontractor.

In Berkley Insurance Company v. Suffolk Construction Company, a mixed-use real estate development project was completed 17 months late. A dispute arose between the contractor and its drywall subcontractor as to who was responsible for the untimely completion of the project.

The contractor argued that the subcontractor caused the project to finish late due to the subcontractor’s failure to properly staff the project, failure to properly clean its work areas, and workforce “walk-offs.” In response, the subcontractor contended that the contractor mismanaged the completion of the project, which caused the delays.

At trial, the court considered whether the no-damages-for-delay clause barred the subcontractor’s claim.
After a two-week bench trial, the court found that the contractor’s “handling of the Project ultimately caused the Project’s overall delay.” And the court concluded that the contractor’s “mismanagement of the Project made it impossible for [the subcontractor] to adhere to any agreed upon timelines.”

The contractor asserted many arguments as to why the subcontractor should not be awarded its damages, including that the subcontract had a no-damages-for-delay clause. That clause provided the following:

The Subcontractor agrees that it shall have no claim for money damages or additional compensation for delay no matter how caused, but for any delay or increase in the time required for performance of this Subcontract not due to the fault of Subcontractor . . . .

The court noted that “Florida courts have held that no-damages-for-delay clauses do ‘not preclude recovery for delays resulting from a party’s fraud, concealment, or active interference with performance under the contract.” The court noted that “[t]his restriction comports with a contracting party’s implied promise not to hinder the other party’s ability to perform its contractual obligation.”

The court concludes the no-damages-for-delay clause did not bar the delay damages claim.
The court found that the evidence showed the contractor “actively interfered with [the subcontractor]’s ability to complete its responsibilities under the Subcontract by failing to prepare floors for [the subcontractor] to work sequentially; by mismanaging other trades causing damage to work already completed by [the subcontractor]; and by misallocating building resources and personnel creating a chaotic and unstable situation.” Thus, the court concluded that the no-damages-for-delay clause did not bar the subcontractor’s claim for damages.

Bottom Line: The active-interference exception to the enforceability of a no-damages-for-delay clause is a common issue litigated in payment disputes arising out of construction projects. As can be seen above, the exception—like many construction law issues—is fact intensive. A party seeking to enforce a no-damages-for-delay clause must ensure that it does not actively interfere with the other party’s work or that party may lose the benefit of the clause.

If you would like to see another example of a court finding a no-damages-for-delay clause unenforceable, click here.

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