Court Enforces No Damages for Delay Clause in Construction Contract

On October 22, 2018, Justice Ostrager of the New York County Commercial Division issued a decision in Hailey Insulation Corp. v. WDF, Inc., 2018 NY Slip Op. 32717(U), enforcing a no damages for delay provision in a construction contract, explaining:

Finally, WDF moves to dismiss Hailey's fourth cause of action seeking delay damages. The subcontract states: "The Subcontractor acknowledges that the Subcontract Price is based on the fact that the Contractor is not liable, absent actual fraud or intentional misconduct, for any damages or costs due to delays, accelerations, impact, non-performance, interferences with performance, suspension or change in the performance or the sequence of the Contractor's Work." The Court of Appeals has held that a clause which exculpates a contractee from liability to a contractor for damages resulting from delays in the performance of the latter's work is valid and enforceable and is not contrary to public policy if the clause and the contract of which it is a part satisfy the requirements for the validity of contracts generally. The exception to the rule stated by the Court of Appeals allows for damages to be recovered for: (l) delays caused by the contractee's bad faith or its willful, malicious, or grossly negligent conduct, (2) uncontemplated delays, (3) delays so unreasonable that they constitute an intentional abandonment of the contract by the contractee, and (4) delays resulting from the contractee's breach of a fundamental obligation of the contract.

Here, the allegations that the delays were caused by WDF's bad faith or grossly negligent conduct are entirely conclusory and are clearly intended to fit within the exceptions stated in Corinno. The delays are not so unreasonable as to constitute an intentional abandonment of the contract, nor do they result from a breach of the fundamental obligations of the contract. Further, the delays of a subcontractor on this type of construction project are reasonably foreseeable and thus cannot be said to be uncontemplated within the meaning of the Corinno exception. Therefore, Defendant's motion to dismiss Plaintiffs fourth cause of action for delay damages is granted.

(Internal quotations and citations omitted).

One of the reasons parties often choose to have their contracts governed by New York law is that courts generally enforce agreements as written. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure how to enforce rights you believe you have under a contract.