Delays Not Contemplated by Parties at the Time of Contract Are Not Within The Scope of a “No Damage for Delay” Clause.
Kegler Brown Construction Newsletter September 1, 2007
In Nix, Inc. v. City of Columbus, 171 N.E.2d 197 (Ohio App. 10th Dist. 1959), the contractor entered into a contract with the City of Columbus on the assumption (by both parties) that the city had procured the necessary right of way for the project. In fact, the city did not have the necessary right of way and the project was delayed by four months as a result. The "no damage for delay" clause at issue was very broad and included damages for "any hindrance or delay from any cause whatever in the progress of the work." The court held that damages arising out of the city's delay in acquiring the right of way were not precluded by the no damage for delay cause. The court explained that where both parties had signed a contract on the assumption that the city had acquired the right of way, any damages resulting from the city's delay in attaining the right of way were not within the contemplation of the parties at the time the contract was made.
This rule also applies to the State on public projects. In Royal Elec. Constr. Corp. v. The Ohio State Univ., 1993 WL 532013, at *1, the contractor was delayed in starting on the project as a result of the unexpected discovery of asbestos and other problems. First, the provision in issue provided that "there is no liability for damages resulting from delay caused by third persons." The court, by strictly construing the provisions found that the provision did not apply to delays caused by the State because the State was not a "third person."
Next, the court found that even if the provision applied to the parties it would not have applied to the specific delays experienced by the contractor. The court found that the delays encountered by the contractor "were well beyond what could have reasonably been anticipated by the contract" and further noted that the "discovery of asbestos in flooring and pipes was unanticipated, and that the delays by the general contractor and others led to an accumulation of delays that resulted in the loss of an unreasonable amount of time." The court went on to state that "a certain amount of delay in a construction project may be foreseeable, the accumulation of delays can be of such a magnitude that, taken together, the extent of delay becomes unforeseeable." The court concluded by finding that because the delays experienced by the contractor "were unforeseeable, the delays necessarily were 'not within the contemplation of the parties at the time the contract was made'", and thus, it would have been proper for the lower court to refuse to enforce an otherwise valid no damage for delay clause.
In Avon Excavating Co. v. City of Parma, supra, LEXIS 41557, at *1, the contractor alleged that the bid plans were prepared incorrectly and that the city interfered with the construction of the project, that it ordered unauthorized work stoppages and that it failed to timely acquire and deliver easements so that the contractor could proceed in a timely manner. The trial court put the issue to the jury to determine whether or not the delays were in the reasonable contemplation of the parties at the time the contract was entered into. The jury found that the delays were not within the contemplation of the parties and thus awarded damages. The court of appeals upheld the decision.
In the most recent case on the subject, the Franklin County Court of Appeals reversed the summary judgment in favor of the public owner and held that for a NDFD provision to be enforceable, the extent and magnitude of the delay must have been foreseeable. Cleveland Construction v. Reynoldsburg City Schools, Case No. 96APE02-242 (June 28, 1996, unreported). A prime contractor defaulted and it took the School District a significant amount of time to replace the defaulting contractor, causing delay to the project and damage to the other prime contractors. The Court of Appeals ruled that the trial court had erred by ignoring the case law and granting summary judgment for the School District with a literal reading of the NDFD clause. The Court of Appeals reversed because a NDFD clause is not enforceable when the magnitude of the delays was unforeseeable.
Another recent case from the Northern District of Ohio held a NDFD clause unenforceable when the owner failed to keep its promise to effectively supervise and coordinate the work of the other prime contractors. JWP/Hyre Electric Co. v. Mentor Village School District, 1996 U.S. Dist. LEXIS 2117 (February 9, 1996).