No-Damage-For-Delay Clauses: Fair? Enforceable?

No-damage-for-delay clauses are common in construction contracts, but are they enforceable? The one-sided nature of these “exculpatory” clauses has caused courts to view them with a jaundiced eye. Several well-recognized exceptions to enforceability have been carved out in recent decades. Yet the clauses continue to appear in prime contracts and subcontracts alike.

A recent case illustrates that delay disclaimers can be enforceable when carefully drafted. A prime contractor detailed the risks presented to a subcontractor on a particular project: numerous subcontractors, coordination and interference issues, out-of-sequence work, recurring schedule revisions, compression and acceleration of the work. The subcontract then expressly assigned these risks to the subcontractor and disclaimed any liability on the part of the prime contractor. A federal appeals court said it doubted any reasonable jury could find an applicable exception to enforceability. No-damage-for-delay clauses are not always taken seriously in the contracting community. There is a belief that they are frequently unenforceable. Yet this recent case shows that careful draftsmanship, as opposed to off-the-shelf boilerplate language, will make these clauses enforceable even in jurisdictions that recognize numerous exceptions.

I invite your comments below on no-damage-for-delay clauses. Are they fair? When should they be used and how should they be drafted?

Featured in next week's Construction Claims Advisor:

• Sub Should Have Alerted Prime to Pre-Existing Safety Hazard
• Split Decision Rules Design Conflict “Patent”
• Contractor Did Not Give Sub Reasonable Opportunity to Complete Work

Bruce Jervis, Editor
Construction Claims Advisor

Comments

[Selwyn DelHomme]

I've been involved in Mechanical Construction Management for over 38 years and this has been one of the 2 or 3 most debated issues throughout my career.
I have funcetioned as an Expert Witness many times for both Owners and Contractors regarding causation of delay and feel there is no one solution to this problem.
From my perspective the major issue is between the owner and the prime contractor.
My personal opinion is that the no damage for delay clause should be removed from contracts in its current form

[NZ]

I have found these delay / damage to quite often be quite onerous. I am the President and partner of a specailty design/manufacture/build firm and find that contracts are becoming increasinlgy devoid of general contractor risk. Don't get me wrong, the general is only as good as his subs and a gc does assume a good deal of risk, but so much risk is continually being passed along to the subs, including these delays, errors in shop drawings that were not properly correlated with the architect's design, as well as financial risk, et al. Seems like subs are more and more financing projects on an overall scale. Back to the point though, we have been in the situation where we have seen delays caused by others on a given project that eventually cause us damages as a company. Being delayed on one project will lead to delays on other projects...and it can snowball. Unfortunately though, there seems to be little that we can do to recoup anything at all for being delayed....even demob and remob costs are almost impossible to recoup. In the end, subs are almost always smaller in revenue and scale than the gc's they work for and have little leverage in enforcing contract terms when the contractor is at fault, but certianly vulnerable when they are at fault. The scale continues to tilt the way of the party with the largest budget for legal fees.

I am sure there will be comments from contractor that refute my claim, but its unfortunately true. We rarely engage in legal actions as there almost always a better way to an amicable solution. However, there are those situation where there is only one way to resolve a claim. Either way, it would be difficult for any contractor to admit that a sub has more contractual rights, and less liability, today than he did 10, 20 or 50 years ago.

[Dmjr]

This comment is in reply to NZ posted on 1/07/2010 at 2:56 pm. Wow!! I see that I am not the only sub-contractor that has experienced this kind of manipulation by a GC. I like your comment...well stated. Maybe we should develop an organization for sub-contractors to network against this type of contractual abuse

[Roger Stevenson]

I don't agree things have changed to avoid risk by GC in the past 30 yrs.Liquidated damages for delay have been around along time and subs are often the cause.It's a free country and nobody has to agree to contract with delay a clause.
R.S.

[MD]

I am the owner of a commercial casework and millwork shop and always run into schedule conflicts. Being one of the last trades in we are often asked to escalate the schedule to make up delays by previous trades for what ever the reason. We are expected to perform miracles in the same spaces as other finish trades I.E flooring, painting, electrical trim and plumbers with out any compensation. A sub contracting organization should be formed to protect us from this abuse.

[Sally Ziegler]

There is an organization for Subcontractors that deals with these very issues. It is the ASA on the National level (American Subcontractors Association) with local chapters throughout the country.

[DMB]

I have been in the construction industry as a CM/GC for over 30 years. In that time, I can count on one hand the number of times I have been involved with a lawsuit with a subcontractor (none with an owner)and have never gone to court. Yet our contract also has a no damage for delay clause. As I see it, the problem lies in the terms of the subcontracts that are accepted by each party. I require all of my managers to prepare a detailed schedule specifically detailing the activities and durations required from each of our subcontrators and make that a part of the subcontract, specifically recognizing that job conditions may require us to resequence activities, but holding the subs to the durations they agreed to. After that, it's a matter of both the subs and us honoring our commitments.

[David H]

Why not publish the case cite, or at least give us the language from the clause. How can we use the information provided without more?

[J Cox]

The comment about it being a free country and we subs dont have to sign the contracts. This is totally an absurd comment. How many times have subs sent in proposals for projects, be accepted, then when the contracts show up the terms change the substantial understandings of the original proposal? Ill tell you in my case as a Painting sub, everytime! And so Im left with the FREE choice of rejecting the biased contract and losing the work, or trying to line item veto the contract, or lose the work.
Its extortion if you ask me. And the power lies with the GC. The only remedy I have found lies with the moral and ethical content of the GC's hearts. I dont need tell you how hard it is to find that little bit of info out the first time. GC's are out of control.

[John McGrail PE]

Frankly,the no-damages-for-delay is a license to steal. There are plenty of solid reasons why a contractor(or subcontractor) should be compensated as a consequence of a delay beyond its control. NDFD clauses are a veneer for the negligent administrator of the contract to crudely hide its own sloppy administration. So people understand my street"cred",I work for a public agency administering construction contracts and I do not like the clause at all. I realize that many swear by the clause while I swear at it.

[Bruce Jervis, Editor, Construction Claims Advisor]

There was a request for the language of the no-damage-for-delay clause in question. It is lengthy. The disclaimer itself is generic and broad form; a blanket exculpation from liability for delay, disruption, etc. of any kind, regardless of its cause.
What distinguished this disclaimer, and made it so enforceable, is that it was preceded by a recitation of the scheduling and delay risks the subcontractor would face on this particular project. In conjunction with the disclaimer, this effectively shifted these risks to the subcontractor.

[Guest]

What jurisdiction? Do you have a case cite?

[Bruce P. Ogden, Esq.]

Perhaps NDD clauses would be less prevalent or onerous if delay claims themselves were better documented, less exaggerated, and confined to the true nature of such a claim. They shouldn't be used as just the route to a total cost-type recovery.

[jordan 11]

Mishaps are like knives that either serve us or cut us as we grasp them by the handle or blade. Do you understand?

[Air force ones]

Fair is ordinary,but in fact there are so many things seem unfair,so we must try our best to persuie the true,so first ,we can build the relation each,we are fair,after all I am.