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Delay Damages: Defenses

April 9, 2014 Construction Industry Legal Blog

Reading Time: 7 minutes

Once a delay is successfully proven—discussed in part one of this multi-series—the next step is to deal with any possible defenses.  This process varies depending on which side you are on:  whether seeking damage for delays or attempting to refrain from paying delay damages.  This step must be completed prior to calculating possible damages for a few reasons.  Most importantly it avoids unnecessary legal battles, extra costs and headaches.  As discussed in the first part of this series, proving that a delay has occurred and determining the amount of damages is specific to each case.  There are numerous factors and methods used not only to prove that a delay occurred, but also in measuring the damages that result from the delay and in defending a claim for delay damages.  This Blog post will provide a brief overview of damages for delay generally, and then focus specifically on the defenses.

Awarding damages based on contracts serve the purpose of placing the non-breaching party in the same position as if the breach never occurred.  Liability can be based on multiple theories, but most delay damages are calculated using the measure for a breach of contract.  The measure of delay damages is, “[T]he loss naturally and proximately flowing from the breach, or those damages reasonably within the contemplation of the parties at the time the contract was entered into.”[1]  To recover damages, the burden is on the claimant to prove, by a preponderance of the evidence, the existence of a contract, a breach of the contract and that damages flowed from the breach.[2]  If liability is established, delay damages do not have to be proved with any mathematical certainty; the non-defaulting party’s actual expenditures are presumed reasonable, subject to contrary proof.[3]  Recovery will not be denied simply because it is difficult or impossible to prove an exact dollar amount of damages.[4]

So now you are likely thinking, “This all sounds great, but my contract has a clause specifically prohibiting delay damages” or “written notice was not provided, like the contract requires.”  These clauses—prohibiting delay damages and requiring written notice for any claim of delay damages—are common in many, if not most, construction contracts.  Waiver also may be available to the claimant to side-step these defenses, but successful use of waiver is difficult in the presence of a written contract.  Waiver is the “intentional relinquishment or abandonment of a known right or privilege, or conduct that warrants an inference of the intentional relinquishment of a known right.”[5]  If you are attempting to recover delay damages, look for any sign of waiver; likewise, if you are trying to keep from paying delay damages, adhere to the specifics of the agreement and do not waive any rights.

No Damages for Delay Clause

Florida follows the majority rule that no damages for delay clauses are legal and enforceable, except in the case of fraud, bad faith or active interference by the owner. [6]  Florida courts have also held that no damages for delay clauses cannot be read literally to preclude all conceivable claims against parties the clauses were intended to protect.  The seminal case of Triple R Paving, Inc. v. Broward County reinforces and slightly broadens previous case law that erodes the no damages for delay defense.[7]  In addition to fraud, bad faith or active interference, the applicability of a no damages for delay clause is further limited when “willful concealment of foreseeable circumstances that impact timely performance” is present.[8]  Triple R Paving is significant in that it liberally construes the active interference requirement to include inaction as opposed to intentional action.  In light of this holding, and the holding reached in Newberry Square, Florida courts look to specific circumstances brought about by the owner in determining whether to bar recovery of damages due to the presence of a no damages for delay clause.

The exceptions to the no damages for delay clause are also rooted in public policy.  Courts can carve out exceptions to this clause because an owner should not be allowed to hide behind a defense while conducting itself in a manner inconsistent with fair dealings.[9]  Therefore, an owner’s, or its agent’s, unreasonable delay or interference with the project limits the applicability of the no damage for delay clause.[10]  So long as a party sits by idly seeking protection, and unreasonably relies on a no damages for delay clause, the presence of this clause will likely not preclude delay damages.[11]

Written Notice

Construction contracts commonly require that any claim for additional costs, time extensions or delay damages be preceded and confirmed by a written notice.  The notice must be given within a specified period of time after the event causing the delay; failing to do so may preclude any recovery of delay damages.[12]  The written notice requirement may be waived by the parties throughout the course of performance of the contract.  Waiver of this requirement can occur when a party accepts late performance or orally modifies the work.[13]  If the written notice requirement is complied with, a claim for delay damages or reservation of rights must be included; failing to include the reservation of rights waives the rights.[14]  Therefore, the contractor or subcontractor should expressly reserve their right to delay damages on the face of any change order or written notices.

Once the delay damages have successfully been proven and the defenses are avoided, it is now time to measure the damages.  Stay tuned for the next segment outlining one of the numerous methods to calculate delay damages.

[1] Tuttle/White Constructors, Inc. v. Montgomery Elevator Co., 385 So. 2d 98, 100 (Fla. 5th DCA 1980).

[2] Knowles v. C.I.T. Corp., 346 So. 2d 1042, 1043 (Fla. 1st DCA 1977).

[3] Tuttle/White, 385 So. 2d 98 at 100.

[4] Mori v. Matsushita Electric Corp. of America, 380 So. 2d 461 (Fla. 3d DCA 1980).

[5] Hale v. Dept. of Revenue, 973 So. 2d 518, 522 (Fla. 1st DCA 2007).

[6] Triple R Paving, Inc. v. Broward Cnty., 774 So. 2d 50, 54 (Fla. 4th DCA 2001).

[7] Id.; see Newberry Square Development Corp. v. Southern Landmark, Inc., 578 So. 2d 750 (Fla. 1st DCA 1991) (finding that the no damages for delay clause does not protect an owner who has been involved in willful, wrongful, deliberate, arbitrary or capricious conduct that causes the delay).

[8] Triple R. Paving, Inc., 774 So. 2d at 55.

[9] Id.; see Port Chester Electrical Construction Corp. v. HBE Corp., 894 F.2d 47, 48 (2d Cir. 1990) (basing its holding on the “universally accepted proposition that contract provisions aimed at relieving a party from the consequences of his own fault are not viewed with favor by the courts.”).

[10] Metropolitan Dade Cnty. v. Frank J. Rooney, Inc., 627 So. 2d 1248, 1252 (Fla. 3d DCA 1993).

[11] See Chicago College of Osteopathic Medicine v. George A. Fuller Co., 776 F.2d 198 (7th Cir. 1985) (finding a no damages for delay provision can be waived when one party continues to perform based on a verbal assurance that the provision will not be enforced).

[12] See e.g., Marriott Corp. v. Dasta Constr. Co., 26 F.3d 1057 (11th Cir. 1994) (failure of contractor to request time extension defeated contractor’s delay damages claim even though owner actively interfered with performance).

[13] Aetna Life Ins. Co. v. Hughes, 282 So. 2d 661 (Fla. 4th DCA 1973); King Partitions & Drywall, Inc. v. Donner Enterprises, Inc., 464 So. 2d 715 (Fla. 4th DCA 1985).

[14] Indian River Constr. Co. v. City of Jacksonville, 350 So. 2d 1139 (Fla. 1st DCA 1977).

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