This is the third post in the four-part series “Limitations of Liability—The Elephant in the Room.”

Owners often attempt to limit their liability to contractors through what is commonly known in the construction industry as a “no damages for delays” clause.  Much like waivers of consequential damages, a “no damages for delays” clause, which limits damages for construction delays, accelerations and other inefficiencies, can serve a fair purpose, despite the perceived severity to a contractor who falls behind schedule for reasons beyond its control.  These delay-related costs (especially indirect costs such as extended home office overhead or lost bonding capacity) tend to be speculative and difficult to prove.  Proving and defending delay claims is also a very expensive proposition, both as to entitlement and quantum.  Finally, project owners presume that contractors are better prepared to confront project delays, and to carry costs for such a contingency in their pricing.

In many jurisdictions these clauses are fully enforceable, albeit with limited exceptions that courts have restricted in recent years.  Contractors that choose to ignore these clauses do so at their peril.

Nonetheless, no contractor can anticipate every delay or impact, and a protracted delay in a project can have a devastating financial impact on the construction team.  There should be a means by which contracting parties can fairly allocate the cost issues that come with unexpected delays, without leaving the door open for speculative claims.
Continue Reading Limitations of Liability— Scenario Two: No Damages for Delay Clauses