Differences in Types of Damages Matter

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Over the last 7 and a half years (yes I have been doing this for that long), I have often “mused” on various contractual provisions and their application. Why? Because the contract matters and will be enforced. Provisions like “no damages for delay” and “pay if paid” litter construction contracts and will be enforced if properly drafted. These types of clauses affect whether and what types of damages you as a construction company can collect.

Of course, these clauses have their limitations. For instance, and as pointed out by my pal Matt DeVries at his great Best Practices Construction Law blog, not all damages that a subcontractor or general contractor may attribute to coordination or other scheduling related issues are “delay damages” to which a “no damages for delay” clause may apply.

Classic delay damages are those caused by disruptions in the schedule that cause a project to take additional time. However, not all scheduling issues cause the project to extend past the final completion date in your contract. Often, through additional man hours, overtime, or other methods, the disruptions to the critical path are handled in such a way as to allow the project to meet the final completion date. These additional efforts inevitably cost money even if they don’t ultimately delay the project. Subcontractors request and general contractors often pay change orders for the additional work necessary to complete on time in the face of owner or other causes beyond that subcontractor’s control. I highly recommend that you read the post linked above as Matt (@matthewdevries on twitter) does a great job distinguishing delay from disruption damages in the context of sovereign immunity.

This second category of “disruption” damages, may not be subject to “no damages for delay provisions” because they did not technically cause a delay, just an increase in cost. It therefore behooves a construction company seeking damages for issues relating to schedule to properly categorize the damages they are seeking (preferably with the help of a scheduling expert and an experienced construction attorney) before going to court or any form of alternate dispute resolution that may be required by the construction contract. Proper presentation of your damages may be the difference between victory and defeat.

As always, I welcome and encourage your comments below, please share your thoughts. Also, please subscribe to keep up with the latest Construction Law Musings.

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