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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: May 19, 2020

Fact Questions Precluded Summary Judgment for Defendant Based on No Damages for Delay Clause

On April 30, 2020, the Third Department issued a decision in Framan Mech., Inc. v. State Univ. Constr. Fund, 2020 NY Slip Op. 02510, holding that questions of fact precluded summary judgment for the defendant based on a no damages for delay clause, explaining:

With regard to delay damages, a contract clause that bars a contractor from recovering damages for delay in the performance of a contract by a contractee are generally valid and enforceable and will prevent recovery of damages resulting from a broad range of reasonable and unreasonable conduct by the contractee if the conduct was contemplated by the parties when they entered into the agreement. However, where, as here, a construction contract contains a no damages for delay clause, various exceptions exist and a contractor may still recover damages for (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. Accordingly, as the moving party, it was defendant’s burden to demonstrate prima facie that none of the exceptions to the damages for delay clause are present.

In support of its motion for partial summary judgment, defendant submitted a copy of the contract and the affidavit of Donald Chester, the associate project coordinator for defendant. In his supporting affidavit, Chester avers that he reviewed the records maintained by defendant, including a two-page spreadsheet that plaintiff provided in response to defendant’s bill of particulars specifically listing its disputed change order proposals, and can verify that plaintiff did not provide contractually required notice for any of the change order proposals that it submitted. However, upon review, it is not evident from Chester’s affidavit or other documentary evidence filed in support thereof as to when plaintiff’s obligation to provide such contractual notice for each of its claims began to run and whether its submissions in this regard satisfied its notice obligations. In other words, although the terms of the contract make plain that the parties contemplated the possibility of change orders, extra work and potential acts or omissions by the contractee, and made plaintiff’s provision of proper contractual notice a condition precedent to suit, it cannot be determined from defendant’s submissions, other than Chester’s conclusory assertion, whether plaintiff complied with the applicable notice provisions.

Chester further avers that the no damages for delay clause set forth in section 3.05(7) served to bar plaintiff’s claim for delay damages. However, the mere existence of a no damages for delay clause, standing alone, is insufficient to establish the applicability of the defense as a matter of law. Although Chester provides a conclusory blanket assertion that none of the exceptions to enforcement of the no damages for delay clause were applicable, said assertion was insufficient in and of itself to establish defendant’s prima facie entitlement to summary judgment dismissing plaintiff’s second cause of action for delay damages. Accordingly, based on the foregoing, we find that Supreme Court erred in granting summary judgment dismissing plaintiff’s first causes of action seeking damages for extra work and second cause of action for delay damages.

(Internal quotations and citations omitted)( emphasis added).

One of the reasons parties often choose to have their contracts governed by New York law is that courts generally enforce agreements as written. Here, the contract provided that the plaintiff was not entitled to damages caused by a construction delay. As this decision discusses, there are circumstances when such clauses will not be enforced. 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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Posted in Commercial, Contracts
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