In NASDI, LLC v. Skanska Koch Inc. Kiewit Infrastructure Co. (JV), 2024 WL 1270188 (2d Cir. Mar. 26, 2024), the U.S. Court of Appeals for the Second Circuit affirmed the District Court’s grant of summary judgment dismissing a subcontractor’s delay claim against a general contractor on a public project in New York state. The Court enforced a typical no-damages-for-delay provision to bar the subcontractor’s breach of contract claim. The no-damages-for-delay provision in the subcontract at issue provided:
NO DAMAGE FOR DELAY. Except as otherwise provided …, Subcontractor agrees that it shall have no Claim against Contractor for any loss or damage it may sustain through delay, disruption, suspension, stoppage, interference, interruption, compression, or acceleration of Subcontractor’s Work (‘Delay Damages’) caused or directed by Contractor for any reason, and that all such Claims shall be fully compensated for by Contractor’s granting Subcontractor such time extensions as it is entitled to as a result of any of the foregoing.
The Second Circuit enforced this clause under well-established New York state law. The Court also examined two exceptions to the enforcement of no-damages-for-delay provisions previously recognized by New York state law, which the Court made clear involve a heavy burden on plaintiffs to successfully invoke. The subcontractor in NASDI sought to avoid the clause by asserting that the delays on the subject project were (1) uncontemplated and (2) so unreasonable that they constitute an intentional abandonment of the contract.
In response to the subcontractor’s claim that the delay on the project was uncontemplated, the Court recognized a total delay to the project of 19 months but found that such a delay was not uncontemplated because New York courts have recognized that lengthy delays are generally foreseeable on complex construction projects. The Court cited cases where no-damages-for-delay clauses were enforced against claims for delays of 20 to 32 months. Thus, without some other extenuating circumstances, the length of the delay alone will most likely not defeat a no-damages-for-delay provision under the uncontemplated delay exception.
The Court followed the same reasoning in rejecting the subcontractor’s second claim that the delays were so unreasonable that they constitute an intentional abandonment of the contract. The length of the delay alone was insufficient to make them unreasonable under New York law. The subcontractor also claimed a cardinal change had occurred on the project but failed to provide sufficient evidence to support such a claim.
A no-damages-for-delay provision provides significant protection against delay claims under New York law. In addition to the two exceptions addressed in this case, New York law recognizes two additional exceptions: (1) delays caused by bad faith or willful, malicious, or grossly negligent conduct and (2) delays resulting from the breach of a fundamental obligation of the contract. However, as the NASDI Court made clear, exceptions to no-damages-for-delay provisions are rarely successful. When faced with a no-damages-for-delay provision under New York law, a subcontractor would be well-advised to include in its claim time-related damages arising from a cause other than the delay covered in such provision.
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