A No Damages for Delay Clause can be included in construction contracts to prevent either party from being able to recover monetary damages for delays that occur on a Project. These clauses are enforceable if they are mutually applicable to all parties to the contract.
In the recent history of Texas’ jurisprudence, there were a number of common law exceptions or defenses to the applicability of a No Damages for Delay Clause. From a contractor’s standpoint, some examples are owner interference, inadequacy of the plans and specifications, bad faith, or fraudulent inducement into the contract.
However, in a recent case from a Houston appellate court, Port Authority of Harris County v. Zachry Construction Corp., the Houston court upheld a No Damages for Delay Cause and completely wrote off the application of common law defenses. The court overturned a $23 million jury verdict and trial court judgment because it felt the parties had freely entered into a contract that specifically waived either parties right to recover damages in the event of delays or hinderances to project completion.
The case is lengthy and includes much more discussion of the details that I am providing in this brief summary. However, this case is significant and could completely alter how parties negotiate and price construction contracts in the future. The case could also have a significant impact on construction claims and litigation.
The ability to get around the application of a No Damages for Delay Clause could be greatly impeded. While there are sometime more than one way to attribute the same damages to a project and the manner in which a case is shaped could alter the effect of this case’s holding, it might require multiple breaches and some creative argumentation to make some damages recoverable over one of these clauses.
Zachry, the losing party at the court of appeals, has filed a petition for review with the supreme court. That petition was filed only weeks ago, so there may not be any action by the supreme court for some time. I’ll update this blog when there is more to report.