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Texas Construction Law Blog

For Subcontractors & Suppliers

How to Circumvent “No Damages for Delay” Clauses

Posted in Collection, Construction Contracts, Delay Damages, Uncategorized

Most commercial construction contracts contain a “No Damage For Delay” Clause and most contractors mistakenly believe they are Kings X for any potential claims related to delay caused by an owner or original contractor. While nearly every commercial construction contract contains the same or similar provisions, it is important to keep in mind they all have different authors, which means typically no two clauses are ever drafted the same.

This is particularly important when it comes to “No Damage For Delay” Clauses as the actual breadth of the language and scope will set the tone for their enforcement or circumvention. There are several common law exceptions to “No Damage for Delay” clauses recognized in Texas, which may be neutralized or ignored by the particular language of a “No Damage for Delay” Clause.

Per the recent case Zachry Constr. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (Tex. 2014) the Texas Supreme Court recognizes the following 5 common law exceptions:

(1) the damage producing delay was not intended or contemplated by the parties to be within the purview of the provision;

(2) the damage producing delay resulted from fraud, misrepresentation, or other bad faith on the part of one seeking the benefit of the provision;

(3) the damage producing delay has extended for such an unreasonable length of time that the party delayed would have been justified in abandoning the contract;

(4) is not within the specifically enumerated delays to which the clause applies; and

(5) the damage producing delay was based upon active interference, or other wrongful conduct including arbitrary and capricious acts, willful and unreasoning actions, without due consideration, and in disregard of the rights of other parties. Id, citing Green International, Inc. v. Solis, 951 S.W.2d 384, 387-388 (Tex. 1997).

The most critical issue regarding these exceptions as discussed in Zachry is whether or not the “No-Damage For Delay” Clause is drafted either so specifically or globally for the express purpose of circumventing the common law exceptions. If a “No Damage for Delay Clause” specifically addresses the 5 common law exceptions, there is likely no way around its harsh effect. However, if a particular clause fails to address all or some of the 5 common law exceptions there is room for maneuverability to defeat its strict enforcement.

Please feel free to share your thoughts and experiences.

Implied Warranties: Part One (Goods)

Posted in Construction Contracts

Texas law imposes certain implied warranties on the sale of goods, regardless of whether the warranties are mentioned in the contract.  In particular, Texas law creates the warranty of “merchantability” and the warranty that the goods are “fit for a particular purpose.” Continue Reading

7 Ways to Manage the Credit Risk of a New Customer

Posted in Collection

Get the project information up front

You should ask your customer for the owner’s name and address, the location of the project, a copy of the payment bond (if any), and the general contractor’s name and address (if you are a second tier subcontractor or supplier).  Having this information at the outset will help you quickly send out bond and lien notices if the new customer falls behind on making payments. Continue Reading

Increasing Your Recovery Under a Federal Payment Bond Claim

Posted in Bonds

Federally owned construction projects are covered by a Miller Act Payment Bond for the benefit of the subcontractors and suppliers thereof.  If you make a claim for payment under the Miller Act, you may, under certain circumstances, also have a claim for attorney fees and interest.  The text of the Miller Act is silent with respect to attorney fees and pre-judgment interest.  However, federal common law allows the recovery of both under certain circumstances. Continue Reading

The Supreme Court Blesses Arbitration Clauses in Covenants Not to Compete, But is Arbitrating a Non-Compete Always a Good Idea?

Posted in Arbitration

Non-competes are governed by different rules from other contracts.  Courts limit non-competes to certain circumstances, such as when an individual has received confidential information, goodwill, or specialized training; even then, the restrictions on competition must be “reasonable.”  However, when it comes to determining the applicability of the Federal Arbitration Act, the United States Supreme Court recently held non-competes should be treated the same as any other contract Continue Reading

10 Drafting Tips for Covenants Not to Compete

Posted in Uncategorized

A recent article in the Wall Street Journal discussed the rise in litigation regarding covenants not to compete, along with a summary of the positives and negatives of these covenants.  For good or bad, a covenant not to compete is enforceable in Texas if it is ancillary to, or part of, an otherwise enforceable agreement at the time the agreement is made, but only to the extent that the covenant contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other protectable interests of the employer. Continue Reading

Legislative Update

Posted in Construction Legislation

Construction legislation in the 2013 session was much different from 2011.  In 2011 many new construction related laws were passed including governance of indemnities and mechanic’s liens.  In 2013 many significant construction related bills were considered, but relatively few passed.  Nevertheless, the few that did get signed into law are worthy of review. Continue Reading

Contractors and Suppliers’ Defenses to Bankruptcy Preference Claims

Posted in Bankruptcy

Bankruptcy preference claims are always an unpleasant surprise. They are frustrating and, in many circumstances, are unjust because they allow a bankruptcy trustee or the debtor to clawback money you received in exchange for providing valuable labor, services, or products. Continue Reading