Published on: November 20, 2017
A recent Appeals Court decision calls into question longstanding legal precedent in enforcement of the so-called “no-damages-for-delay” clauses typical in construction contracts in both the public and private sectors, and also creates new law in Massachusetts for the acceptance of the “total cost” method in calculating damages.
Central Ceilings, Inc. v. Suffolk Construction Company, Inc., et al. involved a public construction project for the Massachusetts State College Building Authority. The MSCBA hired Suffolk Construction Co. to build three dormitories at Westfield State University, and Suffolk in turn contracted with Central Ceilings to, among other things, install dry wall, exterior metal framing and metal door frames. As in most construction projects, the subcontract between Suffolk and Central contained a no-damages-for-delay — or NDD — clause that precluded any recovery for “money damages or additional compensation for delay no matter how caused” and restricted Central’s remedy for delay to an extension of time.
That is a risk-shifting mechanism whereby the subcontractor can seek an extension of time for delays, hindrances or interferences with its work, but is otherwise precluded from seeking monetary damages arising from those delays. On public contracts, in particular, it is an important shifting of risk because it insulates the contractor, and ultimately the public owner, from liability for delay damages from downstream contractors and subcontractors.
Both the trial court, in its ruling issued after a jury-waived trial, and the Appeals Court recognized the unambiguous NDD clause in the subcontract. However, both courts refused to give effect to the NDD clause, finding that the clause did not apply to the types of damages being claimed by Central, and that Suffolk was foreclosed from relying on it because Suffolk had breached the subcontract (and denied Central its only remedy under that clause) by orally telling Central that no extensions of time would be given.
With respect to the first point, the trial court narrowly defined “delay damages” falling within the scope of the NDD clause to be limited to damages for idle workforce, to the exclusion of other types of “traditional” delay damages.
Not only was that a departure from past precedent from the Supreme Judicial Court, which has defined “delay damages” to include not just idle workforce, but prolongation costs, acceleration costs, and loss of productivity, but it ignored that the genesis for the claimed damages was, at its heart, delay.
Although the trial court found that “delays of various types” caused Central to incur added cost and productivity loss, it nonetheless chose to draw a distinction that heretofore has not previously existed under Massachusetts law.
Specifically, Central claimed that because of delays and hindrances to its work, it had to accelerate the work by adding labor to the job. This was a classic “constructive acceleration” claim whereby a contractor contends that it was delayed, that it was denied extensions of time, and that it therefore had to constructively accelerate the work in order to meet the completion date required by the contractor or owner for whom it was working.
Traditionally, in order to establish such a claim, the contractor would first have to establish delay to its work — in most cases a critical path delay. The contractor would then need to establish that it requested extensions of time or modifications to the project schedule but was denied any such extensions or modifications.
In this case, the trial court found that Central had been delayed by actions or inactions by Suffolk and the public owner. Oddly, it did not require Central to meet the remainder of its burden, however — namely, to show that Central had requested extensions of time or modifications to the contract schedule and that such requests were denied by Suffolk.
It appears that both the trial court and the Appeals Court after it were satisfied and accepted without question the testimony by Central’s project manager that Suffolk had orally told Central at some point in time that no time extensions would be granted.
The case highlights the need to be careful in negotiation construction contracts and to require all changes to the contract to be accompanied by written change orders.
Please contact Ed Allcock (firstname.lastname@example.org) and John Shaffer (email@example.com) regarding litigation and negotiation of contract disputes.
For a copy of the Central Ceilings, Inc. v. Suffolk Construction Company, Inc., et al Decision [click here].