Delay damages can accumulate quickly and reach substantial amounts. Contractually excluding delay damages is one way that parties address the financial risks of construction delay. Such contract provisions are known as \u201cno damages for delay\u201d clauses. Courts generally do not favor such clauses because these exculpatory provisions may allow a party to escape liability for damages caused by its own acts or omissions.<\/p>\n
Read literally, a \u201cno damages for delay\u201d clause can prevent a party\u2019s, e.g., subcontractor\u2019s recovery for a compensable delay caused by the upstream contractor\u2019s breach of contract. As a matter of public policy, though, some legislatures have enacted statutes precluding such literal applications. In response to such statutes and the courts\u2019 strict reading of these clauses, contracts may contain clauses not expressly labeled \u201cno damages for delay\u201d \u2013 even though the advantage gained by the upstream party\u2019s use of such clauses is woven throughout the contract.<\/p>\n
By blending the effects of a no damages for delay clause with other clauses appearing to give a subcontractor remedies, an upstream party can defeat a subcontractor\u2019s claim for \u201cextra\u201d compensation. However, a court may negate this blending effort by parsing out the no damages for delay clause from other clauses that offer the subcontractor remedies. Then, the upstream party may find itself having to compensate the subcontractor without equal compensation flowing down to that contractor.<\/p>\n
Although parties often seek to avoid liability for delay damages, contracting parties also expect to be paid consistent with their contracts. To address the risk that contract pricing rests unfairly on mistaken assumptions, parties to a construction contract may include an equitable adjustment clause providing for a contract price adjustment when unforeseen events beyond a party\u2019s control cause a change in construction costs. Equitable adjustments are particularly significant in long term unit price contracts because many unexpected events can impact the original unit pricing.<\/p>\n