Another Tool to Erase “No Damage for Delay” Clauses in Pennsylvania
The Commonwealth Court of Pennsylvania recently considered an issue not yet addressed by established case law concerning the ability of a contractor to recover delay damages in the face of a “no damage for delay” clause in a construction contract. For years, contractors and construction attorneys referenced a 2006 decision by the Commonwealth Court of Pennsylvania, captioned Guy M. Cooper, Inc. v. East Penn School District, for the current state of the law concerning the enforceability of a “no damage for delay” clause. In Guy M. Cooper, the court declined to find in favor of a plaintiff/mechanical contractor to permit an exception to a “no damage for delay” clause found in the owner school district’s contract because delays were caused by another contractor.
The court reasoned that an owner bears no responsibility for a separate contractor’s delays unless the owner or its representative “affirmative[ly] or positive[ly] interfere[s] or fails to act in a manner necessary to complete the work.” The court concluded that reasonably anticipated delays by such contractors were covered by the contract’s “no damages for delay” clause. However, in so holding, the court did not address the outcome of an instance where an owner has scheduling and coordination responsibilities, or when the owner or its representative fails to act on an essential matter.
Recently, the Commonwealth Court addressed this factual scenario left open in Guy M. Cooper. In John Spearly Construction, Inc. v. Penns Valley Area School District, John Spearly Construction, Inc. (Spearly), was hired by the Penns Valley Area School District (District) as the general contractor to construct a biomass boiler system. The District entered into contracts with other prime contractors, and also hired a design professional (Architect) to serve as its representative on the project. The Architect’s administrative duties included the processing of payments and change orders.
At the conclusion of the project, Spearly filed suit against the District seeking delay damages. Spearly alleged, among other things, that the District and the Architect actively interfered with its work by failing to provide timely responses to Spearly’s requests for information, and by delaying the issuance of change orders. Spearly further alleged that the District’s hiring of another contractor to perform work on stormwater and sewer pipes on the project had not been anticipated by the parties, and resulted in additional delays to Spearly’s work. The trial court agreed with Spearly, rendering a verdict in its favor and finding that the “delay was caused solely by [the District’s] action and inaction.” The District appealed, arguing that the trial court erred by failing to enforce the contract’s “no damages for delay” clause to bar damages for the delays of another contractor. The District also argued that delays in the issuance of change orders did not constitute “active inference” on the part of the District.
On appeal, the Commonwealth Court held that an owner may be liable for the action or inaction of third-party contractors when the owner is ultimately responsible for the scheduling and oversight of those contractors. The court held that the District and its Architect committed active interference by failing to process change orders and that the District’s lack of schedule coordination constituted a “failure to act in an essential manner.” Delays occasioned by the hiring of the stormwater/sewer contractor were found to be attributable to the District, and the Court affirmed an award of delay damages to Spearly on that basis.
It is important to note that Spearly does not overrule Guy M. Cooper. The facts of that case were markedly different, as the delays in Guy M. Cooper were caused by the actions of a general contractor over whom the owner had no obligation to coordinate or schedule work, and which the plaintiff was aware would be on site and working. While the Spearly decision does not create an obligation on the part of public owners to control the actions of contractors on a construction project, it conclusively reinforces their responsibility to act in a timely and appropriate manner in completing tasks that they are contractually obligated to perform, and to avoid engaging in any action or inaction that results in delay to a contractor’s performance of its work.
Contractors who have experienced delay on a public project should look closely at the cause of those delays and the owner’s responsibility for coordination in order to determine if an owner’s conduct has voided the protections of the “no damages for delay” clause. Prior to executing contract documents, contractors should consult their legal counsel in order to determine if the owner has any coordination or scheduling responsibilities on the project and to ensure that the contract documents appropriately reflect the owner’s obligations.