The old adage is "time is money." There is no place this saying is more true than the modern construction project. In addition to the money associated with increased costs and expenses for delays on a project, delay claims are likely the most complex type of construction litigation case to handle. It is critical to protect your business, understand how to preserve and assert your delay claims, and defend against claims that your actions delayed the project.
This topic is highly complex there are actually several books that are devoted entirely to construction delay claims. Part one of this series addresses different types of delays, potential sources of delays and contract terms that may impact on delay claims.
Types of Delays Defined
In the layperson's sense of the word, "delay" simply means a postponement in the completion of a task. In the legal sense of the word, "delay" can actually involve several distinct situations that present different legal claims and defenses.
Delays generally fall into two categories: excusable delay and non-excusable delay. Generally speaking, excusable delays are those not caused by the contractor's lack of performance. Non-excusable delays are those caused by the contractor's lack of performance or breaches of contract on the job.
Keep in mind, delay cases can involve not only a pure extension of completion time on a project, but also the related concepts of suspension of work on the job, ongoing disruptions to performance on the job, and efforts of the contractor to accelerate work on the job to meet schedules or to reduce delays. Each of these situations involves different issues of proof and these definitions can be critical to your company's position depending on the terms of your contract.
Potential Sources of Delay
Excusable delays can come from a number of different sources. For example, every contractor has faced a situation of an owner delaying a project. The owner may change his or her mind about a design or budget decision in the middle of the project. The owner may also add significant elements of construction during the job without regard to the potential scheduling and financial impacts to the ongoing project.
Similarly, errors or omissions in the contract documents can lead to excusable delays on the project. The obvious example is where a change in design occurs after an element of construction is performed, requiring crews to go back, remove and replace the element of construction. Delays can also flow from changes in design before an element of construction has even started.
Delays arising from the lack of performance of the contractor on a job are generally defined as non-excusable delays. For example, if the contractor or subcontractor were stretched too thin with too much work and failed to supply an adequate amount of workers, this situation would be a non-excusable delay. Incorrect work that needs to be corrected may also cause non-excusable delays.
As a subcontractor, if you are delayed due to the general contractor's (GC) lack of performance, your ability to recover for these delays may depend on your contract. Many subcontract agreements contain terms that a subcontractor can only recover for delays if the GC recovers from the owner. Obviously, the GC would not recover from the owner for delays caused by the GC's own infractions. Therefore, GC-caused delays may translate to unrecoverable damages for your company.
Some sources of potential delay can fall into either the excusable or non-excusable delay category depending on the factual situation. For example, many delay claims relate to "unexpected site conditions." A good example of such a condition is running into unexpectedly bad soil. On some projects, however, the risk of bad soil is contractually shifted to the contractor. As such, the definition of whether delays relating to such issues are excusable or non-excusable can depend on your contract.
Weather conditions can create similar factual issues. If you are delayed by weather, your ability to recover for such delays, or your risk of liability for such delays, may turn on expert review of typical weather patterns for your area. Again, the terms of the contract and specifications may contain specific provisions defining the precise conditions required to recover for weather delays.
Another blended source is the delay in the process for submission, review and approval of shop drawings, samples and product data. The submittal procedure can often be relatively Byzantine leading to miscommunications and submittals sitting on various desks. Further, late submittals of long lead-time items can create delays. Finally, repeated rejections of submittals can lead to delays. The question of whether such delays are compensable or non-compensable depends on detailed and often complex reviews of the facts, documents, contracts and specifications.
Contractual Points of Note
There are various contract terms that can have a significant impact on potential delay claims. Before starting a project, you need to know what all the terms of the contract are relating to scheduling, and also be familiar with the submittal procedure and timing to avoid potential delay liability. You also need to know all specification requirements relating to time to ensure that your scheduling submissions meet the specifications.
Perhaps the most critical contract term relating to delay claims is notice of claims. Most contracts contain provisions with a specific deadline for submission of claims. Failure to adhere to the requirements of notice of claims may eliminate your claim before you even raise it.
A "time is of the essence" clause basically converts all delays in performance to material breaches of contract. The legal import of a breach being material is that it permits recovery of damages and possibly termination depending on the facts. A minor breach of contract that is not "material" does not necessarily permit recovery of damages and does not excuse the contractor from performing the remainder of the contract.
Some contracts contain a "no damages for delay" clause. Other contracts contain express limitations on delay damages or provide that only time extensions may be granted for delays.
On their face, a no damages for delay clause could be fatal to delay-based causes of action. There may still be a question as to whether some types of "delay" style damages may be asserted even if you have signed a contract with a no damages for delay clause.
For example, if you are required to accelerate and add crews to stay on schedule due to owner-caused delays, these increased expenses may be direct damages and not fit into the definition of "delay" damages under the laws of your state and the terms of your contract.
In addition, some states are not supportive of these types of clauses. The enforceability of such a clause will depend on the law that applies to your project. Finally, some state legislatures have enacted specific legislation limiting the applicability or enforceability of no damages for delay clauses.
Some Practical Tips
There are some practical points about delay claims that must be emphasized.
First and foremost, delay claims are complicated and expensive. Rather than presenting a single issue, delay claims force your lawyer to understand literally every day on the job to defend or prosecute the claim. As the need for detail and information increases, and as the lawyers' analysis extends into different trades, the complexity of the case expands exponentially. You can expect the hours spent by the lawyer and resulting bills to increase exponentially as well. Imagine paying a lawyer by the hour to review every page of every document ever issued on a construction project every letter, every memo, every contract and every note and you are starting to comprehend the complexity and expense of these claims. In addition, delay experts are extremely expensive and they must also engage in the same scope of review and analysis of documents.
If you are involved in a potential delay claim of any magnitude, I would strongly recommend that you immediately hire an experienced lawyer. Most projects involving large-scale delay claims warrant retention of a lawyer early in the process to assist you with review of documents, preparation of protective correspondence, and general advice about how to document or defend the claims during the job.
It is absolutely critical that you provide timely notification of your potential claims and that you properly document these claims. If you fail to comply with your contract's notice of claims provisions, you may have ended the case before it is even started.
Finally, you need to review, analyze and understand all of the contract documents on the job. This includes not only your subcontract and the masonry specifications, but also the general contractor's contract, the specifications regarding submittals, the scheduling specifications, and the specification provisions relating to extensions of time and change orders. On most projects, the subcontractor is bound to the terms of the general contract. In many instances I have seen, the subcontractor has never even requested, let alone seen, the GC's agreement until a problem has occurred. It is bad enough to have onerous terms of a subcontract jammed down your throat over objection, but it is far worse to sign off on harsh terms sight unseen without understanding their potential impact on your claims. This is particularly true of claims notice provisions and provisions relating to the recoverability of delay damages and time extensions.
Delay claims are highly complex, expensive and difficult to prosecute or defend. You need to understand the contract terms and scheduling provisions before starting a job to protect your company and ensure that you can either prosecute or defend any delay claims on your projects.
Timothy R. Hughes, Esq., is the principal of the Northern Virginia law firm of Hughes & Associates, P.L.L.C. He specializes in construction litigation, corporate and business related representation, and complex civil litigation. He may be reached at firstname.lastname@example.org.
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