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Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, May 12, 2008

"No Damages for Delay" Clause Enforced in Colorado

_colorado_flag_2A Colorado appellate court recently held that a "no damages for delay" clause in a construction subcontract was enforceable. The general contractor had a highway construction contract with the Colorado Department of Transportation. The general contractor entered into a subcontract for the earthwork on the project. The subcontract contained a "no damages for delay clause", which provided:

Section 6. Delays. (a) In the event the Subcontractor's performance of this subcontract is delayed or interfered with by acts of the Owner, Contractor or other Subcontractors, he may request an extension of time for the performance of same, as herein provided, but shall not be entitled to any increase in the subcontract price or to damages or additional compensation as a consequence of such delays or interference, except to the extent that the prime contract entitled the Contractor to compensation for such delays and then only to the extent of any amounts that the Contractor may, on behalf of the Subcontractor, recover from the Owner for such delays.

A dispute arose when the general contractor and subcontractor could not agree on the amount of the subcontractor's final compensation for the work. Among other things, the subcontractor sought additional compensation based on alleged delays relating to the construction of a retaining wall and traffic lane closures. The general contractor maintained that this compensation was precluded by the “no damages for delay” clause in the subcontract.

The appellate court affirmed the trial court, and enforced the clause:

We are unaware of any published state court decision in Colorado addressing a “no damages for delay” clause. However, a federal appeals court in a case arising in Colorado and the majority of courts in other jurisdictions that have addressed the issue have generally upheld the validity of such clauses. See W.C. James, Inc. v. Phillips Petroleum Co., 485 F.2d 22, 25 (10th Cir.1973) (observing that “[s]uch clauses are commonly used in the construction industry and are generally recognized as valid and enforceable”); Owen Constr. Co. v. Iowa State Dep't of Transp., 274 N.W.2d 304, 306 (Iowa 1979) (“Such clauses are defended [in cases involving public contracts] on the theory they protect public agencies which contract for large improvements to be paid for through fixed appropriations against vexatious litigation based on claims, real or fancied, that the agency has been responsible for unreasonable delays.”)(citing A. Kaplen & Son, Ltd. v. Hous. Auth., 42 N.J.Super. 230, 233, 126 A.2d 13, 15 (1956)); Maurice T. Brunner, Annotation, Validity and Construction of “No Damage” Clause with Respect to Delay in Building or Construction Contract, 74 A.L.R.3d 187 (1976 & 2007 Cum.Supp.)(collecting numerous state and federal cases upholding “no damages for delay” clauses); see also In re Marriage of Bolding-Roberts, 113 P.3d 1265, 1267 (Colo.App.2005); Kohn v. Burlington N. & Santa Fe R.R., 77 P.3d 809, 811 (Colo.App.2003) (observing that when there are no Colorado decisions, we may look to other jurisdictions, including federal jurisdictions, for guidance).

Nevertheless, “no damages for delay” clauses have been strictly construed against owners or contractees because of the harsh results that may flow from the enforcement of such clauses. See John E. Green Plumbing & Heating Co. v. Turner Constr. Co., 742 F.2d 965, 966 (6th Cir.1984) (applying Michigan law); E.C. Ernst, Inc. v. Manhattan Constr. Co., 551 F.2d 1026, 1029 (5th Cir.1977) (applying Alabama law); Cunningham Bros., Inc. v. City of Waterloo, 254 Iowa 659, 664, 117 N.W.2d 46, 49 (1962).

We are persuaded by these decisions, and we similarly conclude “no damages for delay” clauses are valid and enforceable in Colorado, but they are to be strictly construed against the owner or contractee.

Tricon Kent Co. v. Lafarge North America, Inc., __ P.3d __, 2008 WL 1902514 (Colo. App. May 1, 2008).

[Meredith R. Miller]

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