Construction Contracts: No Damage for Delay Cause

By James L. Rudolph, Esq.

In general, the courts in Massachusetts enforce valid no damage for delay clauses in contracts. However, in rare instances in Massachusetts the courts recognize three exceptions in which a valid no damage for delay clause may be set aside: (1) where a defendant’s acts are arbitrary or capricious; (2) where the delay is unreasonable in length; or (3) where by its words or conduct the defendant waived the no damage for delay provision.

Regarding the first exception, arbitrary and capricious behavior, the courts in Massachusetts have been reluctant to use this exception to set aside a valid no damage for delay clauses except in the most egregious and compelling circumstances. One rare instance was when the Massachusetts Supreme Court (SJC) held that a contractor may recover even when there is an exculpatory delay provision if the owner’s acts were arbitrary and capricious and unreasonably hampered and delayed the contractor. In that case, the no damage for delay provision provided the plaintiff with the sole remedy of the right to seek an extension of time should there be a delay. The SJC found that the defendant’s refusal to grant such an extension was arbitrary and capricious and that the no damage for delay clause was therefore unenforceable. One factor the SJC may have relied in finding that the defendant’s actions were arbitrary and capricious, in addition to the fact that the defendant provided no reason for refusing to grant an extension to the plaintiff, was the defendant’s seemingly purposeful use of the no damage for delay provision as leverage against the plaintiff. According to the court, the defendant, the Commonwealth of Massachusetts, used the “delay provisions to whipsaw the contractor.”

Regarding the second exception, delays unreasonable in length, the courts have also been reluctant to use this exception to set aside a valid no damage for delay clause. In another case, the SJC indicated that it might consider that where a delay is “unreasonable in length” a plaintiff may be compensated even though there exists no damage for delay clause. This case also involved a no damage for delay clause which provided that in the event of a delay the plaintiff only had the right to seek an extension of time. Although the SJC ultimately found that an eight (8) month delay was not unreasonable, it did so after making two (2) observations.

First, the SJC noted that the delay was not caused by the defendant. Second, the SJC noted that the plaintiff was aware of the possibility of delay at the time the contract was entered into. According to the SJC, the plaintiff knew that the project was contingent on the completion of another project – the construction of the Turnpike — before the work could commence and therefore was aware that there might be a delay. It is possible that if the delay had been caused by the defendant (and not by the owner) and could not have been anticipated by the plaintiff, then an eight month delay might have been sufficient for the SJC to find that this equitable exception applied. However, there appear to be no cases in the Commonwealth where this equitable exception has been successfully invoked.

Regarding the final exception waiver, the courts have found that in certain instances a defendant by his words or deeds may waive enforcement of a no damage for delay clause. The Appeals Court ruled in one case that where a defendant had paid the plaintiff $122,726 for “extra costs due to job delays” such actions by the defendant waived its right to later rely on a no damage for delay clause in the contract to avoid paying the plaintiff additional monies. The Appeals Court found that this one substantial payment alone by the defendant to the plaintiff was sufficient to serve as a waiver.

Finally, it should be noted, that some plaintiffs have attempted to avoid the problems posed by a no damage for delay clause in a contract by claiming in the complaint that they are seeking damages for “hindrance” or “interference” and not “delay.” This strategy, in general, has usually not proven successful. However, in the recent case of Dowd Plumbing Corp v. ODF Hoon Peabody, the judge differentiated delay claims from hindrance, interference and loss of productivity claims and ruled that these claims can exist separately from delay claims. The court noted that the case before it was not a “delay” claim even though the case may have had components of delay; rather, it was more akin to a claim for “hindrance or obstruction” in the performance of the work.