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July PAY!
No Damage for Delay
Don’t Let Costs of Delay Snarl Your Business
Another delay. At the owner’s direction, the general
contractor held up your crew for a whole day because the owner changed its
mind at the last minute about where to house some telecommunications
hardware. Later that month, you submit your invoice on time, including an
adjustment in labor plus costs for rented equipment you had to keep an
extra day. Several weeks later, you receive your check, but the extra
costs caused by the delay are conspicuously absent. Scrawled on a note in
the envelope is: "No payment for delay items!" The note also
cites the paragraph of your subcontract with a "no damage for
delay" clause in it. You’ve been burned again.
Don’t let this scenario happen to you. An unmodified
"no damage for delay" clause often is a "scorched
earth" contract term that aims to keep you from recovering damages in
a wide variety of situations. A "no damage for delay" clause in
the subcontract can cause more "damage" than you think. For
example, some of these clauses make impossible price adjustments for costs
created not just by delays, but also by "obstructions,"
"hindrances," or even "performance by others on the project
that increases the cost of the subcontractor’s performance."
Fortunately, even when one or more "no damage for
delay" clauses exist in the subcontract, most courts recognize that
some circumstances are unforeseeable, such as unexpected subsurface
conditions. If the subcontractor is not the cause of the unforeseeable
circumstance, a court may well judge that the "no damage for
delay" clause cannot be enforced. Many state legislatures have
limited the enforceability of "no damage for delay" clauses
through anti-indemnity and other laws.
Of course, you don’t want to have to go to court to
collect the money you are owed. Sometimes litigation is the only option,
but the adage, "An ounce of prevention is worth a pound of
cure," applies. The easiest way to help ensure that your subcontracts
will not keep you from pursuing additional direct costs caused by another
contractor, the construction manager, the architect or the owner is to
include an exception letter conditioning your bid on use of the American
Institute of Architects A401 document or making the subcontract subject to
ASA’s Addendum to Subcontract. In ¶ 7, the Addendum
provides:
…
Subcontractor shall be entitled to an equitable adjustment in the price of
the work, including but not limited to any increased costs of labor,
including overtime, or materials, resulting from any change of schedule,
acceleration, out of sequence work or delay caused by others for whom
Subcontractor is not responsible …
Using the Addendum may be very advantageous
because its language overrides all language to the contrary, wherever it
is in the amended subcontract.
Another key to preserving your right to pursue delay
claims is to ensure that you always give required notice of delays or
other problems as stipulated in the contract. You may be penalized if you
do not follow the contract to the letter.
These are just a few ideas to help improve the
experience of getting paid for extra labor, equipment rental and materials
required on the job site. ASA’s Payment Advocacy Year (PAY!) Web page at
www.asaonline.com/pay.htm contains many more ideas
and payment resources. This article is provided in conjunction with ASA’s
Payment Advocacy Year (PAY!).
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