Construction projects fall behind schedule for many reasons. For instance: a hurricane may hit the site destroying the work in place; an owner may fail to respond promptly to critical RFIs bringing work to a standstill; or a general contractor may fail to coordinate the work causing logjams and inefficiencies for subcontractors. Although the cause of any given delay may be less than clear, one thing is almost always certain – schedule impacts have wide-ranging financial repercussions for everyone involved in the project. Subcontractors, however, are likely to feel the tangible effects of an impacted schedule first and most significantly, since they carry the initial burden of a paying for most of the labor and material costs. Subcontractors may be forced to accelerate their work in a compressed schedule, working nights and weekends. They may lose productivity if the contractor stacks the sub-trades. Delays and the slippage of the construction schedule may result in escalation of wages and material costs. If your project schedule has been impacted for reasons unrelated to you and your costs are spiraling out of control, first read your subcontract and then understand Massachusetts’ law.
In the absence of any contractual provision to the contrary, Massachusetts permits a subcontractor to recover damages for schedule impacts that they did not cause, provided the impact arises out of the other party’s breach of contract. The problem for subcontractors is that the vast majority of subcontracts today contain some type of no-damages-for-delay clause. Many general contractors incorporate these provisions into their subcontracts to attempt to exculpate themselves from liability by eliminating a subcontractor’s right to recover money damages arising from schedule impacts, no matter how caused. Usually the only allowable remedy is an extension of time for impacts not caused by the subcontractor. Although these provisions can yield a harsh result to an innocent Subcontractor who has not caused any delay, Massachusetts court have found that no-damages-for-delay clauses are valid and enforceable, subject to certain exceptions discussed below.
A typical no-damages-for-delay provision found in contracts for public or private work in Massachusetts may read something like this:
The Subcontractor agrees that it shall have no claim for money damages or additional compensation for any delay, hindrance, interference or obstruction, no matter how caused, but may be entitled to an extension of time for any delay, hindrance, interference or obstruction not caused by the Subcontractor.
This provision seeks to bar the Subcontractor’s ability to recover money damages as a result of certain schedule impacts regardless of by whom and how they are caused.
Even if you are burdened with a no-damages-for delay clause don’t despair since there are several exceptions which may permit recovery of damages.
M.G.L. c. 30 sec. 39O. M.G.L. c. 30 sec. 39O provides the first such exception and applies only to public jobs in which the awarding authority suspends, delays or interrupts construction operations, which in turn causes extra costs to the general and subcontractors. The statute defines the circumstances under which compensation is to be awarded. It requires that the suspension, delay or interruption must (a) be ordered in writing by the awarding authority, (b) either last for at least 15 days or result from the authority’s failure to act within the time specified by the contract, (c) increase the contractor’s cost of performance and (d) not be covered under any other contract provision. The first requirement is critical, because the Supreme Judicial Court ruled that the statute does not apply absent a written order to suspend or delay. Where applicable, the statute limits payments to any increase in the cost of performance, without profit. It bars extra costs incurred more than 20 days before the general or subcontractor gives written notice of the act or failure to act involved in the claim, and it requires that the amount of the claim be submitted “as soon as practicable” after the end of the suspension/delay/interruption/ failure to act, and in any event, no later than the date of final payment.
Unreasonable refusal to grant an extension of time . Massachusetts courts have also created judicial exceptions that may provide a subcontractor relief from the harsh effects of a no-damages-for-delay provision 1 . The most frequently used exception is described in the seminal case of Farina Bros., Inc. v. Commonwealth decided by the Massachusetts Supreme Judicial Court in 1970. In Farina, the contractor experienced significant delays waiting for the Commonwealth to provide approvals and to complete work necessary for the contractor to complete its work. In response to Farina’s request that the work be shut down until the issues were resolved, the Commonwealth ordered Farina to continue to work wherever and whenever it could under the threat of termination. Farina finished the work beyond the completion date and submitted claims for additional costs due to extended performance and for time extensions. The Commonwealth denied Farina’s request for additional time and its claim for damages relying on the no-damages-for-delay provision of its contract. The Court allowed Farina to recover damages for its delay refusing to enforce the no-damages-for-delay provision on the grounds that the Commonwealth had wrongfully denied time extensions and had used the no-damages-for-delay provision to “whipsaw” the contractor.
Similarly, the Suffolk Superior Court in the case of Central Ceilings, Inc. v. Suffolk Construction Company, Inc. et al 2 (December 2013) refused to enforce a no-damages-for-delay clause and permitted a subcontractor to recover damages for loss of productivity where the general contractor wrongfully deprived the subcontractor of its contractually-mandated remedy of time extensions. Judge Haggerty wrote: “This deprivation [failure to grant time extensions] is, itself, a breach of the Subcontract, and Central’s damages for loss of productivity are a direct result of this breach…The plain language of the no-damages-for–delay clause accordingly does not bar Central’s recovery.” Another 2013 Superior Court decision found that the no-damages-for-delay provision was no bar to a contractor’s damages claim where the owner “willfully disregarded the most basic and time-honored of owner’s obligations: to provide the contractor with a site that is ready for the work he has contracted to do, and then to permit him to do it without hindrance.” Both Superior Court decisions recognize that under Farina one may not turn their back on their contractual obligations and then seek the refuge of a no-damages-for-delay clause.
Waiver of no-damages-for-delay clause . A lesser-known exception to the no-damages-for delay provision arises where a party waives the provision, either expressly or by its acts and conduct. In a 1990 decision, the Massachusetts Appeals Court held that a public owner had waived the no-damages-for-delay provision by writing several letters in which it expressed an intent and desire to pay for the contractor’s delay and then by actually paying for certain delays associated with the electrical work. In these types of circumstances where there is clear evidence of a party’s intent to waive the no-damages-for-delay provision, a subcontractor may be able to recover damages resulting from an impacted schedule despite the existence of a contractual provision purporting to bar these same damages.
Breach of independent contract requirement . In 1969 the Supreme Judicial Court in State Line Contractors, Inc. v. Commonwealth held that a contractor’s damages arising from a schedule impact caused by the Commonwealth were recoverable even in light of an otherwise enforceable no-damages-for-delay provision. In this case the general contract provided that the work on a roadway and an adjacent rest area were to be performed simultaneously. The Commonwealth, however, stopped the rest area work for months due to title issues with the property, requiring the contractor to perform the roadway work sequentially, rather than simultaneously. The contractor submitted a claim for damages resulting impacted schedule. The Commonwealth alleged that the no-damages-for-delay provision precluded recovery for this claim. The SJC disagreed, holding that the Commonwealth breached its independent contractual obligation to allow the work to proceed simultaneously and, as a result, permitted the contractor to recover money damages for what it characterized as extra work arising as a result of this breach.
The best route to recovery of delay damages is to avoid the clause altogether. If you have appropriate bargaining strength and are able to negotiate the terms and conditions of your subcontract, you may be able to remove it entirely or modify it so it is more favorable to you. Finally, if you are stuck with a no-damages-for-delay provision in your subcontract, understand its scope and the exceptions which may make the clause unenforceable. It may make all the difference in getting paid for your increased costs as a result of schedule impacts.
1 Other jurisdictions have created judicial exceptions to the enforceability of a no-damages-for-delay clause where there are delays that are: entirely un-contemplated; so unreasonable as to constitute abandonment; resulting from breach of a fundamental obligation of the contract; or caused by active interference or obstruction of an owner or general contractor.
2 This case is on appeal before the Massachusetts Court of Appeals.