After WAY too long a hiatus, I am back with another in my series of “Construction Contract Basics” posts. In past posts, I’ve covered venue provisions, attorney fee provisions, and indemnity clauses. In this post, I’ll share a few thoughts (or “musings”) on the topic of so-called “no damages for delay” clauses. These clauses essentially state that a subcontractor’s only remedy for a delay caused by any factor beyond its control (including the fault of the general contractor), after proper notice to the owner or general contractor, is an extension of time to complete the work.
These types of clauses generally make it impossible for a subcontractor (if found in a Subcontract) or Contractor (if found in a Prime Contract) that is delayed through no fault of its own to recover any damages relating to the expenses that are inevitably caused by such delays. Such expenses/damages could include additional supervisory time (including more high-dollar superintendent payments), acceleration costs, demobilization/mobilization costs, and other related expenses. These can add up to real money. Couple that with the inevitable liquidated damages or delay damages that will occur should a contractor or subcontractor cause any delay, and this becomes a very one-sided proposition.
What can the “downstream” contractor or subcontractor do? Firstly, such downstream construction professionals should argue for a clause that at least allows for the collection of delay-related expenses from the party with whom it has contracted. It is only fair that the party to the construction contract that causes the delay should pay for the consequences. This type of clause therefore seems a reasonable “ask” from the downstream contractor. In support of this type of request, the contractor or subcontractor (or their experienced construction counsel) can state that there is case law in Virginia nullifying such contractual clauses as violating Virginia Code § 11-4.1:1. I recommend both the Musings post and the actual Eastern District of Virginia case cited in that post for your reading.
In short, these clauses are in every form of construction contract that I’ve encountered in one form or another. However, they should not be taken as gospel and should be negotiated to get a more balanced contract between the parties that can form the foundation for a successful project.
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