If you have been around the construction industry for long enough odds are you have come across a "no damages for delay" clause before. More likely than not, you read the provision and thought nothing of it. Make no mistake, it is an important clause and you should understand and consider it.
The no damages for delay clause essentially says that one or both parties will not be held liable for any damages that arise out of a delay in completion. What kind of damages can you incur for a delay? Contractors can face increased overhead, lost profits on other projects that they were not able to take because their manpower and/or equipment was tied up on the delayed project and increased labor costs. Owners can face lost rent, additional carrying costs or miss the prime market to sell.
While there is by no means a hard and fast rule, in general, I have found that owners have much more to loose by waiving delay damages than do contractors. Increased overhead or additional labor charges are certainly something to be concerned about if you are a general contractor but missing out on a prime market, loosing months of rent, or carrying your construction long for too long can quickly and easily build up to the point that they can put the project underwater without any hope of saving it.
One thing you should ask for is that the provision, if it is going to stay in the agreement, runs both ways. Both parties should waive the delay damages not one or the other.
In New York, unlike some other states, the no damages for delay provision is enforceable so don't ignore it.
Vincent T. Pallaci is a partner at the New York law firm of Kushnick Pallaci, PLLC where his practice focuses primarily on the area of construction law. He can be reached at (631) 752-7100 or vtp@kushnicklaw.com
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