“No Damage for Delay” clause does not bar recovery

A Massachusetts Superior Court has recently ruled that a “No Damage for Delay” clause in a construction contract did not preclude a ceiling installation subcontractor from recovering “loss of productivity damages” as a result of the general contractor’s mismanagement of the project.

Relying on the “No Damage for Delay” clause, the general contractor argued that the sole remedy for the subcontractor would an extension of time by which the subcontractor’s work must be completed.

The subcontractor argued that the clause should not be enforced because the defendant general contractor refused to grant extensions as it was contractually obligated to do. Additionally, the subcontractor asserted that it was not actually pursuing damages for delay but instead was seeking recovery of the additional resources it had to expend to address hindrances and interference with its work caused by the general contractor’s mismanagement.

Judge S. Jane Haggerty of the Superior Court agreed stating, in part:

“[The defendant’s] breaches of its obligations did not result in an ‘idle workforce’ on [the plaintiff’s] part, but, to the contrary, in an increased workforce as [the plaintiff] had to comply with [the defendant’s] compressed schedule,” Haggerty wrote, ordering the defendant to pay damages plus interest.

The defendant’s breaches did not affect the plaintiff’s “ability to complete its work on time — and indeed, the project was substantially completed … in compliance with the general contract — but, rather, with its ability to complete its work on budget,” Haggerty continued.

The decision – Central Ceilings, Inc. v. Suffolk Construction Company, Inc., et al., – will have serious ramifications for Massachusetts construction contractors and especially general contractors who often rely on such clauses as a first line of defense against claims brought against them by subcontractors for poorly managed or poorly designed projects that hinder the subcontractor’s ability to complete its work on time and on budget.

While the “no Damage for Delay” defense remains generally enforceable in Massachusetts, the decision shows that the clause will be narrowly construed against the party seeking to avoid liability.

Project Mismanagement

The state hired the defendant Suffolk Construction Co. to serve as general contractor for the construction of a new $25 million dollar residence hall at Westfield State College to be completed by July 1, 2005.

The defendant entered into a $3.5 million dollar subcontract with the plaintiff Central Ceilings, Inc. for drywall work on the project. The subcontract contained a “no damage for delay” provision under which the subcontractor could not make a claim for monetary damages as a result of delays on the project.

Throughout the course of the project there were a number of management and design issues including the poor coordination of work and construction trades; failure to establish correct elevation; failure to provide necessary climate needed for completion of work and other issues.

The plaintiff claimed that due to mismanagement of the project, it was forced to “de-mobilize” and re-mobilize” its manpower, materials and equipment and re-do certain work. The plaintiff claims it also had to increase manpower in order to comply with the compressed schedule that resulted from the delays and defendant’s refusal to grant a time extension.

The plaintiff subcontractor alleged that it sustained over $320,000 in loss of productivity as a result of project mismanagement.

Loss of Productivity Damages

The Court found that defendant general contractor breached the subcontract by failing to adequately supervise, coordinate and sequence work on the project, causing the plaintiff to suffer a loss of productivity.

The Court also found that the defendant violated the terms of the subcontract by failing to grant the plaintiff an extension to complete its work on the project.

In its decision, the Court wrote:

“By not granting Central its requested extensions, Suffolk deprived Central of its contractually-mandated remedy,” the judge wrote. “The deprivation 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.”

The Court concluded that the no-damages-for-delay provision did not preclude the plaintiff from recovery “regardless of whether the court characterizes Central’s damage as arising from Suffolk’s failure to provide Central with the contractually-required extensions or as a result of Suffolk’s hindrances and interferences with Central’s work on the Project.”

The Significance of the Court’s Decision Going Forward

In light of the Court’s decision, owners, contractors and their sureties are now on notice that where they fail to exercise responsibilities within their control – they risk negating the protections afforded by a “no-damage-for-delay” clause and may be liable for loss of productivity damages caused by “hindrances” and “interferences” with the orderly performance of the subcontractor’s work.

Curran & Desharnais offers representation in a variety of other construction law areas as well, including scope of work disputes, delay claims and defective work claims.

Learn More About Our Construction Law Services

Our firm has the experience to handle straightforward and complex construction law issues in Massachusetts. Contact us at Curran & Desharnais, P.C., and to schedule a free initial consultation with our attorneys. Call us locally at 781-618-3197 or toll free at 888-682-9194.

Construction Contracts, Construction Law

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