Validity Of No Damage For Delay Clause In Construction Contracts

It is becoming increasingly evident that “no-damage-for-delay” provisions in construction or building contracts will be strictly enforced except in rare instances.  This principle was recently reiterated by the First Department in WDF Inc. v. Turner Constr. Co., 177 A.D.3d 513, 112 N.Y.S.3d 133 (1st Dept. 2019), which held that a prime contractor’s internal e-mail assessing potential delay damages was irrelevant to the enforceability of the broad no-damages-for-delay clause in the subcontract.  Id., 177 A.D.3d at 514.  The Court rejected the argument that the email constituted a party admission of liability, stating that it was apparent from the email that the prime contractor was assessing the costs claimed by the subcontractor, rather than the viability of the subcontractor’s claims under the terms of the subcontract.  Id. Based on this reasoning, the Court stated that “[t]he fact that [the prime contractor] evaluated whether [the subcontractor] incurred delay damages is irrelevant to the enforceability of the no-damages-for-delay clause.”  Id.

The First Department also noted that the case was “strikingly similar” to a separate action brought by the subcontractor seeking delay damages, wherein the Court concluded that alleged poor administration or planning was insufficient to overcome a no-damages-for-delay clause in a construction contract. WDF, Inc. v. Trustees of Columbia Univ. in the City of N.Y., 170 A.D.3d 518, 96 N.Y.S.3d 42 (1st Dept. 2019).  As a result, the Court found that the no-damage-for-delay provision in the contract was still applicable, as a matter of law.

Recent standard construction contracts issued by the City of New York for its public projects have eliminated the no-damages-for-delay clause, although they still have stringent notice provisions. Nonetheless, many construction contracts with private owners contain this provision. Contractors presented with this kind of exculpatory clause should attempt to remove this language or at least limit the terms.

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