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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.