Contractors are familiar with a no-damages-for-delay provision. But for those unfamiliar with this typical contract provision, it waives a subcontractor’s right to seek additional money on a construction project when the project is delayed for whatever reason. Typically, if a project is delayed, the subcontractor must spend extra time on the project which increases its anticipated costs. These clauses are usually broad and are strictly enforced, but for certain exceptions. But what if the subcontractor does not suffer delay damages, but rather suffers disruption damages.
This situation could occur when a subcontractor is on track to timely finish its job, but the general contractor got in the way and reduced the subcontractor’s productivity. One might say this is the same thing as delay damages but with a different coat of paint. But delay and disruption damages are distinct legal concepts, and courts have held that a waiver of one does not constitute waiver of both.
In one case, a Houston appellate court was clear that “[u]nder construction law, delay damages have a technical definition distinct from disruption damages.” Cnty. of Galveston v. Triple B. Srvcs., LLP, 498 S.W.3d 176, 181 (Tex. App.—Houston [1st Dist.] 2016). The court wrote:
Delay damages refer to damages “arising out of delayed completion, suspension, acceleration or disrupted performance”; these damages compensate the contracting party that is injured when a project takes longer than the construction contract specified.
Disruption damages, on the other hand, are for a project that may be timely completed but nevertheless includes disruption to the contractor and compensates it for “a reduction in the expected productivity of labor and equipment—a loss of efficiency measured in reduced production of units of work within a given period of time.”
Id. (citing BRUNER & O’CONNOR, 5 CONSTRUCTION LAW §§ 15:29 & 15:102 (2002)). If there was no difference between the two damages, then there would be no need to define them differently. Therefore, there is a recognized legal distinction between delay damages and disruption damages.
This case presents an opportunity to both the general contractor and the subcontractor. For the general contractor, it offers a new wrinkle to add to its damage waiver clauses in its contracts to subcontractors. This case shows it cannot rely on a no-damages-for-delay clause to encompass all similar or related damages. The clause must clearly state all damages the general contractor seeks to have its subcontractors waive. For the subcontractors, it presents an opportunity to seek and recover damages it may not have thought it could have on a project it was frustrated on. If you have issues with a no-damages-for-delay contract provision or any other construction law related matters, contact the construction law attorneys at West Mermis PLLC.
Stephen provides legal counsel with respect to complex construction and commercial litigation issues. He is experienced in a broad range of civil litigation matters, and routinely takes depositions and participates in trials and arbitrations.
Stephen assists companies in handling commercial and residential construction disputes, business formation issues, contract drafting and review, employment contracts, personal injury matters, and litigation. He has also handled appellate matters. He regularly represents general contractors, subcontractors, developers, and homeowners.
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