Cardinal Changes & Contract Interference Negate 'No Damages for Delay' Clause

Monday, May 28, 2018 7:10 am
June 2018 - Volume 40 Number 6

Contract Breach --- Damages --- Delay

Rai Indus. Fabricators, LLC v. Fed. Ins. Co., 2018 U.S. Dist. Lexis 74612 (N.D. Cal. May 2, 2018)
Despite a “no damages for delay” clause, a contractor may be responsible for costs its sub incurred to perform changed work---which was not authorized by written change orders.

Sauer Incorporated (Sauer) was the general contractor on a U.S. Army project to design and construct the Operational Readiness Training Complex at Fort Hunter Liggett, California. Sauer entered into a subcontract with Agate Steel, Inc. (Agate) for the “erection of structural and miscellaneous steel for the project.”

The project took significantly longer than expected: The contract timeframe for Agate’s work was 121 days, but the sub was required to work 422 days. Agate attributed the extra time and costs incurred to Sauer for “hundreds of changes to Agate’s work, refus[ing] to approve change orders for time and money for the extra work that Sauer directed Agate to perform, and fail[ing] to provide Agate with proper and updated Contract Drawings in a timely manner.”

Agate sued Sauer for breach of contract and sought approximately $700,000 in delay and disruption damages. Sauer moved to dismiss Agate’s claim, arguing that the no-damages-for-delay clause in the parties’ subcontract barred the sub’s recovery. The court denied Sauer’s motion to dismiss but left the decision of damages recovery for further court actions.

Changes in work scope delayed sub

The Sauer-Agate subcontract’s scope of work required Agate to “furnish all labor, materials, equipment, tools, supplies and all other things necessary to complete diligently and timely the work identified.” Agate argued before the court that, in exchange, it was “the expectation of the parties” that Sauer would provide co[..]