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Posted: August 9, 2018

Alleged Incompetent Project Management Does Not Excuse Enforcement of No Damages for Delay Clause

On August 2, 2018, Justice Friedman of the New York County Commercial Division issued a decision in Primiano Electric Co. v. HTS-NY, LLC, 2018 NY Slip Op. 31859(U), holding that alleged incompetent project management does not excuse enforcement of a construction contract’s no damages for delay clause, explaining:

As held by the Court of Appeals, a no-damages-for-delay clause excusing a contractee from liability to a contractor for damages resulting from delays in the performance of the work is generally valid and enforceable. Exceptions to the enforceability of such provisions include (1) delays caused by the contractee’s bad faith or its willful, malicious, or grossly negligent conduct, (2) uncontemplated delays, (3) delays so unreasonable that theY. constitute an intentional abandonment of the contract by the contractee, and (4) delays resulting from the contractee’s breach of a fundamental obligation of the contract.” A party seeking to invoke any of the exceptions to the general rule that no damages for delay clauses are enforceable bears a heavy burden.

Plaintiff has not met that burden here. Plaintiff’s principal complaint is that the project was badly mismanaged by Dolner who, with Hyatt’s full knowledge, intentionally failed and refused to provide PEC, or any of Dolner’s other subcontractors on the project, with construction schedules. Dolner’s documented failure to properly coordinate the scheduling and sequencing of the work among its 20 plus subcontractors resulted in severe delays that greatly extended the duration of the project.

. . .

Plaintiff does not meaningfully dispute the force of the governing legal authorities, but attempts to distinguish them on the ground that the Subcontract, as well as the Change Order Agreement, recite that time is of the essence. This argument also fails. Provisions barring delay damages have been upheld despite the existence of a time of the essence clause, a time of the essence clause was also present in the subcontracts in both of the cases from which plaintiff speculates it might have been absent. Read in context, the time of the essence clause in the Subcontract protects defendants from possible delays, and does not nullify the express clause precluding an award of damages to plaintiff as a consequence of delays.

The court is also unpersuaded by plaintiffs argument that the nearly seven-month delay in completing the Subcontract work (i.e., the delay between the May 8, 2010 Subcontract completion date in the Change Order Agreement and the actual November 29, 2010 completion) was not, and could not reasonably be, contemplated by PEC at the time the Change Order was negotiated. It is true that the length of a delay is relevant to the issue of whether an exception to the general rule enforcing no damages for delay clauses applies. However, the length of the delay does not transform a delay caused by an event specifically contemplated by the no damages for delay clause into something uncontemplated. Accordingly, damages attributed to delays significantly longer than the seven months complained of here have been found not to be barred by a no-damages-for-delay provision where the cause of the delay was anticipated by the parties.

(Internal quotations and citations omitted).

One of the reasons parties often choose to have their contracts governed by New York law is that courts generally enforce agreements as written, including the “no damages for delay” clause discussed in this decision. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure how to enforce rights you believe you have under a contract.

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