Almost as prevalent as those pesky pay-if-paid provisions are those no damage for delay clauses. Found in most every construction contract, these clauses seek to bar the prospect of any delay damages and to limit the remedy for delay to just a simple extension of time. Not especially equitable, right?
But there are ways to deflect these clauses. Many jurisdictions hold that a no damage for delay provision can be avoided if the delay was actually caused by another’s interference or someone’s wrongful conduct. Enforcement can also be resisted if the delay is unreasonable or not one contemplated by the parties.
That was the case when a paving contractor discovered the road on which it was working was erroneously designed by the engineer. This prevented the contractor from proceeding with a major portion of its work as originally scheduled. The work progressed slowly and out of sequence, and the contractor requested payment for these unauthorized delays. The owner resisted relying on the no damage for delay clause in the paving contractor’s contract.
In the suit that followed, the court found the engineer had reason to know of its design flaws and the likely impact such errors could have on the timely performance of the pavement contractor’s work. Such bad faith and active interference by the engineer nullified the no damage for delay clause.
While this was a good result for the contractor, it should not be presumed that all courts would rule the same way. A better course of action would be to minimize the adverse risks of such clauses through effective contract negotiation – in advance.