By Reed F. Morris:
Q: Are “No Damages for Delay” clauses enforceable in Colorado construction contracts?
A: Yes, they are.
Q: Even with such a clause in the contract, can Colorado contractors still recover for delays?
A: Yes, they still can!
This post outlines the Colorado construction contractor’s delay claim and the proof necessary under Colorado law to successfully make them despite a No Damages for Delay Clause. Delay damages may be incurred even when the job is completed on time in instances where delay scenarios involve these (sometimes overlapping) characteristics:
- Delays: the time-related costs when a project takes longer than expected,
- Disruption: the work is completed on time, but due to the contractor’s work being disrupted, additional costs to productivity were incurred, and
- Acceleration: costs increased because the work was accelerated or early completion was directed.
No Damages for Delay Clauses.
No Damages for Delay Clauses are often included in Colorado construction projects in an attempt to deter a contractor from claiming and eventually recovering delay damages. The mere existence of such a clause raises uncertainty as to the viability of a delay claim, increasing the risk of litigation. Construction contractors may challenge No Damages for Delay Clauses on the following grounds:
- Delays outside the scope of the precise terms of the No Damages for Delay Clause;
- Delays that are unreasonable in terms of nature or duration;
- Delays that are caused by fraud, misrepresentations, or bad faith;
- Delays caused by the owner’s (or upper tier sub’s) material breach of the contract or material interference or disruption of the work;
- Overlapping or concurrent delays;
- No schedule
An example of a No Damages for Delay Clause at issue in one Colorado construction breach of contract case is as follows:
In the event the Subcontractor’s performance of this subcontract is delayed or interfered with by acts of the Owner, Contractor or other Subcontractors, he may request an extension of time for the performance of same, as herein provided, but shall not be entitled to any increase in the subcontract price or to damages or additional compensation as a consequence of such delays or interference, except to the extent that the prime contract entitled the Contractor to compensation for such delays and then only to the extent of any amounts that the Contractor may, on behalf of the Subcontractor, recover from the Owner for such delays.
Tricon Kent Co. v. Lafarge North America, Inc., 186 P.3d 155, 160-62 (Colo.App.2008)
Recovering for Delay Damages Under Colorado Construction Contracts with a No Damages for Delay clauses.
In the Tricon v. Lafarge case, Lafarge was the general contractor working on a CDOT highway project, and Tricon was the subcontractor retained for site work. Tricon’s subcontract contained standard flow-down clauses in addition to the No Damages for Delay Clause set forth above. Tricon alleged that Lafarge failed to properly schedule and sequence the project in accordance with the prime contractor and the ordinary practice in the industry. The resulting change of scope and improper scheduling Tricon alleged caused costly delay damages.
The Tricon case held that a No Damages for Delay Clause is enforceable against contractor delay damages claims in Colorado. However, the case also identifies exceptions to the rule. A Colorado construction contractor may still recover delay damages when it can show either:
- Fraud, Misrepresentation or Bad Faith; or,
- Active Interference with the work of the contractor
Recognizing this “active interference” exception, contractor claims may go forward where the contractor can show interference with their work. This includes direct interference, or failure to act in an essential or reasonable manner that is necessary for the contractor to timely complete their work. This exception arises from the ordinary duty of good faith and fair dealing. Tricon offers satisfactory examples of direct interference and failure to act in a reasonable manner; the subcontractor adequately showed that the general contractor:
(1) failed properly to schedule, sequence, and coordinate the subcontractor’s activities on the project;
(2) ordered the subcontractor to proceed with its work knowing that another subcontractor had not completed necessary work;
(3) threatened the subcontractor with liquidated damages if it did not perform the out-of-sequence work; and
(4) knew of the subcontractor’s needs for efficient performance of its work, yet failed to provide it.
Therefore, the Colorado construction contractor claiming delay damages must:
1) show the defendant committed an affirmative, willful act that unreasonably interfered with the contractor’s performance of the construction contract, regardless whether defendant’s conduct was in bad faith.
2) provide sufficient evidence thatthe defendant’s conduct was more than a simple mistake: error in judgment, lack of total effort, or lack of complete diligence.
Examples of Contractor Delay Damages for Colorado Construction Breach of Contract Cases:
Costs incurred because of owner’s or upper tier contractor’s delay:
- General Conditions: jobsite trailer, utilities, management salaries – i.e., time related costs.
- Office Overhead: administrative and other project support.
- Remobilization: when contractor has pulled off the job site and returns after the delay is resolved.
- Escalation of labor, material, equipment, subcontractors – prices increased due to delay.
- Equipment sitting idle at the jobsite.
For more information about our law firm’s construction practice and to obtain other resources for construction industry professionals, please visit our construction practice page.
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Reed F. Morris is a Denver-based attorney who regularly represents owners, contractors and sureties in payment and performance related construction litigation including private and public jobs, bond claims, mechanic’s liens and related disputes. He is a partner at MLMW and represents parties to construction disputes in state and federal courts and all alternative dispute venues including mediations and arbitrations (AAA). Reed can be reached for questions at rmorris@mlmw-law.com or by phone at (303) 927-0011 (direct).