Active Interference and The No Damage for Delay Clause
Active Interference and The No Damage
for Delay Clause
No Damage
for Delay Clauses are designed to pass the risk of project delays and their
costs to a specific party (generally the contractor). These clauses are
recognized as valid and enforceable in the State of Florida. See McIntire v. Green Tree Communities,
Inc., 318 So. 2d 197 (Fla 2nd DCA 1975); Southern Gulf Util., Inc. v. Boca Ciega Sanitary Dist., 238
So. 2d 458, 459 (Fla. 2d Dist.Ct.App.1970); Pertun Constr. Co. v. Harvesters Group, Inc., 918 F.2d 915,
919 (11th Cir.1990). These clauses can seem harsh when faced with the
reality that delays on construction projects are very common. Because of this
reality, Florida courts have created several exceptions to enforcement.
Situations in which it would be unfair to bar recovery to contractors who have
been delayed in completing their work through no fault of their own. These judicially
created exceptions are: active interference, concealment and fraud.
Active
interference is perhaps the most common exception. It is based on the idea that
one party to the contract is purposefully interfering with or getting in the
way of the other party’s ability to perform the contract.[1] It
has been characterized as a “knowing delay which is sufficiently egregious”. United States v. David Boland, Inc., 2006
US Dist. Lexis 66568 (Fla. Middle District 2006). The case of Newberry Square Dev. v. Southern Landmark,
Inc., 578 So. 2d 750 (Fla. 1st DCA 1991) is instructive. In Newberry, a contractor entered into a
contract with a developer for construction of a shopping center. The parties’
contract contained a no damages for delay clause. The developer sought an
appeal of a lower court order awarding its contractor damages for delays in
project completion. The contractor argued that the developer actively
interfered with its work by delaying the
approval of plans, change orders and payments. The contractor presented
evidence at trial that such delays were a result of a personal falling out
between the parties where the developer vowed he “would break [the contractor]
before he’d pay.” Id. at 752. The
developer argued that the contractor could not be awarded delay damages because
the contract contained a no damage for delay clause. The appellate court ruled
that the developer actively impeded the contractor’s performance and as such
refused to enforce the clause.
In a
similar case out of North Dakota, a steel erection subcontractor on a public
project was awarded delay damages despite the existence of a no damages for
delay clause because it found that the steel subcontractor was told, "to
put up steel wherever it could . . . to demonstrate to [the County] that
progress was being made." The Construction manager on the project rejected
the subcontractor’s plan to erect the steel in a conventional
"inside-out" fashion and demanded that they erect the steel
"outside-in" manner which caused delays. The court found this directive to have interfered with the
subcontractor’s means and methods and its ability to finish its work timely.
C&C Plumbing & Heating, LLP v.
Williams Cty., 848 N.W.2d 709, 716 (N.D. 2014).
In the recent case of John Spearly Constr., Inc. v. Penns
Valley Area Sch. Dist., 121 A.3d 593, 603 (Pa. Comm. Ct. 2015), a County’s
design team was held responsible for delays notwithstanding the existence of a
no damages for delay clause where there was evidence to suggest that design
team hired by the County failed to make
timely decisions on the project schedule and failed to properly coordinate the work of the various trades.
Additional bases
for avoiding no damage for delay clauses have been found in cases of: owner
abandonment, unanticipated delays, refusal to grant required time extensions
and breach of an essential contract obligation. See Corrino Civetta Const. Corp., v. City of New York, 67 N.Y. 2d 297
(NY. 1986); Triple R Paving, Inc.,
Broward County, 774 So. 2d 50 (Fla. 4th DCA 2000); Castagna & Son, Inc., v. Board of Educ.,
of City of New York, 173 A.D. 2d 405 (1st Dep’t 1991); Pertun Const., Co., v. Harvesters Group,
Inc., 918 F. 2d 915 (11th Cir. 1990). For example, in John E. Green Plumbing, a case before
the 6th circuit, a plumbing and fire sprinkler subcontractor on a
public project sought damages as a result of the contractor’s project
oversight, doing work out of sequence and delay in design changes/edits. The
contract contained a no damage for delay clause. In strictly construing the
clause, the 6th circuit held that “Delay damages . . . refers simply
to the cost of an idle work force. . . [the subcontractor] is not arguing that
it suffered damages from delay but rather
that is suffered damages from obstacles created by Turner.” Id., at 967.[2]
In another
interesting case out of the 7th circuit, a contractor represented to
its subcontractor that it would pay for extra costs associated with project
delays created by the owner. As a result of these representations, the court
found that the contractor had waived the no damages for delay clause in the
parties’ contract. Chicago College of
Osteopathic Medicine v. George A. Fuller Co., 776 F. 2d 198 (7th
Cir. 1985).
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[1] Seminole Sheet Metal Co. v. SCI, Inc., 828 F.2d 671, 675
(11th Cir.1987); C.A. Davis, Inc. v. City of Miami, 400 So. 2d 536 (Fla. 3d
Dist.Ct.App.1981).
[2]
The court further defined a
delay as, “time lost when work cannot be performed because the necessary
preliminary work had not been completed”. Id.,
at 966.
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