Motion for Summary Judgment; Breach of Contract; Delay and Acceleration Damages; No Damages for Delay Clauses
By: Nandini Chowdhury | Staff Writer
Plaintiff, a contractor, entered into a contract with Defendant for general construction work as a prime contractor for a new building. The original contract price was for over fifteen million dollars. After approved change orders, the price was increased to over nineteen million dollars. Of the over nineteen million dollars, Defendant paid the Plaintiff paid approximately eighteen million dollars for work completed. Later, Defendant refused to pay the outstanding amount under the contract because it realized that such additional changes were made to the contract by Defendant as work originally delegated to it was completed by a third party. Indeed, Plaintiff was now responsible for a backcharge of over seven hundred and fifty thousand dollars from the original eighteen million dollars it was paid.
Subsequently, Plaintiff commenced an action seeking to recover an unpaid contract balance of over nine hundred thousand dollars from the nineteen million dollars it was owed. Additionally, Plaintiff sought delay and acceleration damages of over three million dollars from Defendant.
Defendant moved for partial summary judgment to dismiss Plaintiff’s claims for delay and acceleration damages. Defendant argued that Plaintiff’s claims for delay and acceleration damages should be dismissed because (1) the claims are barred by a “no damages for delay” clause in the contract; (2) the claims are barred by Plaintiff’s failure to comply with the notice provisions of the contract; and (3) Plaintiff’s usage of the “total cost method” for computing damages was improper. In opposition, Plaintiff argued that: (1) the “no damages for delay” only shields Defendant from damages due to delay under the condition that Defendant grants Plaintiff extensions of time that are commensurate with the delay of the project, (2) it was unable to comply with the notice provisions due to Defendant’s failure to grant extensions of time, and (3) the law allows for the usage of the “total cost method” for computing damages.
The Court granted Defendant’s motion for partial summary judgment in part and denied Defendant’s motion for partial summary judgment in part. First, the Court found that Defendant’s conduct did not amount to bad faith to allow for Plaintiff’s claims for delay and acceleration damages in a contract. While the clauses are generally enforced, New York law recognizes delays caused by a party’s bad faith provides an exception for delay and acceleration damages. Here, the Court found there was no bad faith for four reasons: (1) Defendant’s refusal to grant extensions of time did not amount to bad faith, (2) Plaintiff waived its right to raise such claims under the parties’ “no cost, no time” change order, (3) the record did not illustrate Plaintiff’s claims regarding Defendant’s failure to produce coordinated mechanical, electrical, and plumbing drawings, and (4) there were express contractual clauses which stated that Plaintiff may need to alter its planned sequence of construction to meet the agreed-upon completion date. Accordingly, Defendant’s conduct did not constitute bad faith.
Second, the Court found that Plaintiff’s delay and acceleration damages claims were not barred by Plaintiff’s failure to comply with the required thirty-day notice for increased costs, expenses, and damages. Here, the Court relied on the notice provision in the contract which did not expressly condition Plaintiff’s recovery of damages upon such compliance with the provision. Accordingly, Defendant failed to demonstrate that Plaintiff’s compliance with the notice provision was a condition precedent to its ability to recover delay and acceleration damages.
Third, the Court could not determine an appropriate method to calculate the delay and acceleration damages. Here, the present record was devoid of any support for such method being relied upon as a matter of law. Accordingly, the court denied Defendant’s motion as to this part.
Based upon the foregoing, the Court granted Defendant’s motion for partial summary judgment in part, in that Plaintiff’s claims for delay and acceleration damages were indeed barred by the “no damages for delay” clause. The Court denied Defendant’s motion for partial summary judgment in part, stating that Plaintiff’s claims were not barred by its failure to comply with the notice provisions and that Plaintiff’s use of the “total cost method” was justified as a matter of law.
Andron Constr. Corp. v. Dormitory Auth. of the State of New York, Index No. A114-13, 4/22/2016 (Platkin, J.).