It is common to experience delays during construction projects. When may contractors be entitled to compensation when such delays occur? Generally, four tests must be satisfied before recovery for delay costs will be allowed- a contractor must prove that the delay was (1) excusable, (2) compensable, (3) critical, and (4) non-concurrent.
The remainder of this article will provide a brief explanation of each test. Future articles will then treat these issues in greater depth.
Is the Delay Excusable or Non-Excusable?
Delays that excuse a contractor from performing within the contract period and justify an extension of time to perform are "excusable". Generally, whether delays are excusable depends on contract provisions. Force majeure, acts of God, unexpected weather, labor disputes, owner design problems, owner-initiated changes, and similar factors may cause excusable delays- the main consideration is whether the factors were beyond the contractor's ability to control or foresee. Put another way, delays are generally excusable when another party caused but could have avoided them, or when they were due to environmental factors beyond the control or foresight of anyone.
If an excusable delay is encountered, it is most important to meet contractual requirements that notice be given. Most contracts require written notification of the other party when a delay occurs. A delay claim may be barred if timely written notice was not given when the delay occurred.
An "unexcusable" delay is one which the delaying contractor could have foreseen or prevented but failed to do so. In such cases, the delaying contractor must assume the costs and results of delay for both himself and any other parties impacted by the delay. An unexcused delay may be considered a breach of contract.
There are numerous types of unexcusable delays. If weather conditions, labor problems, or subcontractors' or suppliers' late delivery could and should have been anticipated, then the delay may be unexcusable. Failure to provide adequate staff or tools, inexperience, or cash-flow problems can also result in unexcused delays.
Is the Delay Compensable or Non-Compensable?
Contract clauses generally determine whether delays are compensable or non-compensable. Different types of contract clause attempt to limit compensability.
One common type of contractual clause that attempts to limit delay claims is a "no damages for delay" clause. Essentially, four theories limit the applicability of such a clause: If the delay is (1) due to other parties' action or inaction; (2) not governed by the contract; (3) unreasonably long; or (4) was one whose possibility the parties did not contemplate, it may not be possible to collect damages. Since there are many exceptions to the applicability of contractual limitations on delay claims, contractors should review such clauses with competent legal counsel.
Is the Delay Critical?
Did the delay have an impact on the time for completion of the project as a whole? A delay may not impact the overall project completion date. If it does not, the delayed party may not be able to recover. The contractor must therefore establish that the delay was excusable, compensable, and on the critical path.
Comparison of as-planned and as-built schedules is the key method for determining if a delay is critical. Such a comparison allows the contractor or owner to determine which activities are critical to the earliest completion of the project.
Is the Delay Concurrent?
Two or more independent delays during the same period are known as "concurrent delays". The courts have rendered inconsistent decisions as to delayed parties' rights to recover damages for concurrent, but independent delays. Some have attempted to apportion the damages from such delays among the delaying parties. Apportionment does not have to be exact, and can be complicated by criticality, excusability, and compensability factors. In some cases, the courts have denied recovery to either party, reasoning that such claims were similar to liquidated damage claims.
If you are confronted with delay damages, you should immediately begin documenting the claim, notify the other party to the contract, review your contract for pertinent clauses, and seek competent legal counsel.
This article, ©1997, was written by William C. Last, Jr. Mr. Last is an attorney who has been specializing in Construction Law for 20 years. Mr. Last also holds a California A & B contractors license. He can be contacted at 650-696-8350. This bulletin is published periodically to provide general information about current legal issues. If you have a specific legal question or need legal advice, you should contact an attorney.