No Damages for Delay: Maybe, Maybe Not

Delays on construction projects are as common as shells on the shore. They can arise from contractor fault, owner fault or events beyond either party's control—or any combination of these. Contracting parties contemplate the possibility of delays, and often include contract language to address them—sometimes with clauses precluding a contractor from any monetary compensation for delays, even owner-caused delays.

Such "no-damages-for-delay" clauses can take various forms, but they typically limit a delayed contractor (or subcontractor) to extensions of time for performance in the event of delays beyond the contractor's control. While such time extensions may help avoid assessment of liquidated damages, they put no money into the contractor's pocket for what can often be devastatingly expensive consequences of being on the job longer than anticipated.

Because freedom of contract is an overarching principle in the law, courts generally enforce no-damages-for-delay clauses. Still, contracts excusing a party from liability for the harm he causes have never been favorites of the courts, which have been willing to entertain exceptions to the enforceability of such clauses. While New Hampshire has yet to tackle this question, most jurisdictions refuse to enforce no-damages-for-delay provisions in certain circumstances, such as "if the delay: (1) was of a kind not contemplated by the parties, (2) amounted to an abandonment of the contract, (3) was caused by bad faith, or (4) was caused by active interference," Peter Kiewit Sons' Co. v. Iowa Southern Utilities Co., 355 F. Supp. 376, 397 (S.D. Iowa 1973).

Several states even have statutes disallowing such clauses. Ohio's statute, for example, declares that any clause in a construction contract "that waives or precludes liability for delay...when the cause of the delay is a proximate result of the owner's act or failure to act, or that waives any other remedy...when the cause of the delay is a proximate result of the owner's act or failure to act, is void and unenforceable as against public policy." R.C. 4113.62(C)(1).

The "active interference" exception to enforcement of no-damages-for-delay provisions dovetails nicely with New Hampshire's longstanding rule that "if it can be shown that the performance of the contract was prevented directly or indirectly by the act of the promisee, its non-performance will be excused," Famous Players Film Co. v. Salomon, 79 N.H. 120, 122 (1918). No bad faith need be shown. And the modern trend elsewhere is that "a plaintiff contractor or subcontractor claiming active interference on the part of the defendant owner or contractee need only to show that the defendant committed an affirmative, willful act that unreasonably interfered with the plaintiff's performance of the contract, regardless of whether that act was undertaken in bad faith." Tricon Kent Co. v. Lafarge North America, Inc., 186 P. 3d 155, 161 (Colo. App 2008).

One example of active interference is issuance of a notice to proceed before the jobsite is ready for the contractor's work. U.S. Steel Corp. v. Missouri Pacific Railroad, 668 F.2d 435, 439 (8th Cir. 1982). After commencement, suspension of work by the owner beyond the time reasonably justifiable can likewise overcome a no-damages-for-delay clause—regardless of other contract language affording the owner a right to suspend. Sarasota County v. Southern Underground Industries, Inc., 333 So.3d 285, 288 (Fla. App. 2022).

Indeed, schedule and sequencing changes have been found to justify an award of delay damages even in the face of other contract provisions giving one party the right to dictate progress and sequence of the other party's work. J.J. Brown Company, Inc. v. J.L. Simmons Co., Inc., 2 Ill. App.2d 132, 140, 118 N.E.2d 781 (1954). ("The provision of the subcontract giving defendant the right to direct the sequence or general progress of work does not release it from liability for delay. It implies an obligation on the part of the general contractor to keep the work in such a state of forwardness as to enable the subcontractor to perform within a limited time.")

The common thread here is that owners must give their contractors (and contractors must give their subcontractors) a fighting chance at timely performance—and if they interfere with that chance, a no-damage-for-delay provision likely won't save the day.

-Frank P. Spinella, Jr., partner, Wadleigh, Starr & Peters, PLLC