A subcontract had a “no-damages-for-delay” clause barring the subcontractor from suing the prime contractor for delays. The clause also provided a protocol for splitting any delay-related settlements between the project owner and the Prime. The Prime submitted a claim to the owner to recover delay costs for the Subcontractor and the Owner responded by stating it would do a bulk settlement resolving all claims – leaving the Prime to allocate the settlement among its subcontractors. Before the settlement was achieved, however, the subcontractor sent the prime a notice of termination asserting that the Prime had abandoned the subcontract due to the delays and the Prime’s failure to negotiate the subcontractor’s delay claims in good faith.
The Prime then declared the Subcontractor to be in default and hired a replacement firm to complete the work – costing an extra $24 million which the Prime recovered from the subcontractor’s performance bond. The Subcontractor then filed suit against the Prime for breach of contract, quantum meruit, and breach of the covenant of good faith and fair dealing, all of which were dismissed by the trial court when it granted the Prime’s motion of summary judgment. On appeal, the court affirmed the judgment, because no-damages-for delay clauses are enforceable in New York unless certain exceptions apply. Here, the court held that lengthy delays are generally foreseeable and not “uncontemplated.” The length of the delays was insufficient to make them “unforeseeable” given that New York courts have upheld such clauses when the delays were for even greater lengths of time. NASDI, LLC v. Skanska Koch, Inc., 2024 WL 1270188 (New York 2024).
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with ConstructionRisk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk Report, Vol. 26, No. 8 (Dec 2024).
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