“Educating the Government Contracting Community”

City's Breaches Not Exceptions to No-Damage-For-Delay Clause in Public Construction Contract

C and H Electrical, Inc. ("C&H Electrical"), a construction contractor, wins award of a school renovation and expansion contract in Bethel, Connecticut. The town directs the C&H Electrical to commence work in February 2007. But in the Summer of 2007 the town's asbestos abatement contractor, who was working on another part of the building, barred C&H Electrical from accessing certain areas of the school. C&H Electrical had to move its crews and equipment to different areas and experienced losses in productivity due to repeatedly having to return to certain work areas as the abatement continued. C&H Electrical made a claim for damages due to delays caused by the town that constituted "active interference" and as such were exceptions to the contract's No-Damage-for-Delay Clause. The Court acknowledged that the town had ordered C&H Electrical or to commence work despite knowing that the abatement work could cause C&H Electrical delay and lost productivity. The Court also found that the town failed to coordinate the the work and schedule of its asbestos abatement contractor with C&H Electrical. And the Court found that the town failed to keep C&H Electrical updated as to changes in the project specifications. But the Court found that none of those actions by the town constituted an "active interference" that would negate the No-Damages-for-Delay Clause in the contract.

The Court started by considering the language of the No-Damage-for-Delay Clause:

Notwithstanding anything to the contrary in the [contract], an extension in the [time to complete the work] shall be the sole remedy of [the plaintiff] for any (1) delay in the commencement, prosecution or completion of the work, (2) hindrance or obstruction in the performance of the

work, (3) loss of productivity, or (4) other similar claims whether or not such delays are foreseeable, contemplated, or uncontemplated....

An exception was created for delays caused by acts of the town constituting "active interference." While that term was not explicitly defined in the contract. The contract did include examples of town actions that would not constitute instances of active interference:

.... exercise of any of [the town's] rights or remedies under the [contract] (including without limitation, ordering changes in the work, or directing suspension, rescheduling or correction of the work), regardless of the extent or frequency of the [town’s] exercise of such rights or remedies,

shall not be construed as active interference with [the plaintiff’s] performance of the work.”

Without a definition of "active interference," the Court had to figure out what it was that the town and C&H Electrical actually intended by the wording of the contract they signed. Never a good sign. The Court looked to other jurisdictions and quickly decided that active interference did not require C&H Electrical to prove bad faith or malicious intent on behalf of the town. But the Court reasoned that C&H did have to prove that the town's conduct involved more than mere passive omission, ordinary negligence, simple mistake, error in judgment lack of total effort, or lack of complete diligence. And given that the contract defined out of the definition of "active interference" the town's exercise of its rights under the contract, C&H Electrical had to prove that the town's conduct causing the delays had to be both an affirmative act that unreasonably interfered with the C&H Electrical's work.

The Court acknowledged that C&H Electrical provided evidence that it sent a letter to the town's building committee chairman a letter explaining that the town's undertaking the abatement at the school before starting construction the town would avoid potential complications with the construction work. But the Court ruled that single letter was insufficient to prove that the town had actual knowledge that the town's representatives knew that completing the remaining abatement work during construction would disrupt C&H Electrical's work.

The Court also acknowledged that the town did not disclose to C&H Electrical the delay in completion of the remaining asbestos work. But the Court did not rule this failure of the town to disclose to constitute an affirmative act to attempt to conceal the delay from C&H Electrical. The Court noted that the town conducted public hearings at which the delay in completing the asbestos work was repeatedly discussed. The Court stopped short of announcing that C&H Electrical had a duty to attend all public hearings but used the fact that the town conducted such public hearings as evidence to demonstrate the town's lack of intent to conceal the fact from C&H Electrical. Accordingly the failure to disclose by the town would fall into the category of an omission or oversight rather than an active interference.

Lastly the Court acknowledged that the town failed to coordinate the work and schedule of its asbestos abatement contractor with C&H Electrical. But the Court found that the town had the right under the contract to coordinate contractors in a manner that would result in contractors having to reschedule or suspend their work. Accordingly, as an exercise of its contractual rights this action of the town could not amount to "active interferences" that trumped the No-Damages-for-Delay Clause. http://www.jud.ct.gov/external/supapp/Cases/AROcr/CR312/312CR51.pdf

Knowing that their contract contained a No-Damages-for-Delay Clause and did not define "active interferences" other than to provide examples of certain exceptions that included breaches of contract by the town, C&H Electrical needed to protect itself before it started performing the work by documenting any action or omission by the town that would cause it delay in the most explicit terms possible. A single letter mentioning the possibility of the delay was not going to be sufficient. If the terms of that contract were the best that C&H Electrical could negotiate for itself, then it needed to be much more proactive about protecting its interest as soon as it learned of delaying factors within the control of the town.

GCARL can assist your company in reviewing and negotiating government construction contracts so that you can secure the most favorable terms available and proceed eyes-open with the performance of the work with the knowledge of what to do and how to do it so that your interests, claims, and money are protected. Consider becoming a GCARL Member. Visit us here to learn about the benefits of membership: www.gcarl.com/becoming-member

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