New York Appellate Court Holds That No Damages for Delay Clause Does Not Bar Recovery of Early Completion Bonus

Trocon Construction Corp. v. City of New York
2008 N.Y. App. Div. LEXIS 4316 (May 20, 2008)

The Appellate Division of the Supreme Court of New York held that an early completion bonus in a construction contract was not barred by a “no damages for delay” clause as it was a bid item of the contract.

The case arose out of a contract between a contractor and the City of New York for the reconstruction of part of Sixth Avenue in Manhattan. The contractor agreed to perform soil borings to locate and determine the size of underground voids believed to be contributing to sidewalk and pavement subsidence and to appropriately remedy the voids. Because the City of New York contemplated that the work on the project would interfere with vehicular and pedestrian traffic, the contract provided for various payment incentives for early completion, including an early completion bonus if work on both sides of the avenue was completed within 30 days. Delays arose principally due to a dispute over the boring operations when unexpected boulders were encountered. The contractor contended that it was not required by the contract specifications to perform borings through boulders, which should be completed using a different boring operation; the City maintained that such borings were included and should be performed using the same operation as provided for in the contract. The dispute was resolved by the Contract Dispute Resolution Board, which found that the contractor was entitled to compensation for the extra work performed. The Board claimed lack of jurisdiction to resolve the contractor’s claim for the incentive bonus for early completion of the work on the west side of the avenue.

The contractor commenced this suit for payment it allegedly would have received but for the City’s interference with the boring operation. On summary judgment, the trial court held that the contractor had been fully compensated for the breach as the contractor was awarded damages for the extra work that it performed. On appeal, the Appellate Court concluded that the contractor had not been fully compensated for the breach by the City as the contractor expected to earn a significant incentive bonus for completing the west side work within 30 days. The Appellate Court rejected the City’s argument that the bonus was barred by a “no damages for delay” provision, and concluded that loss of an incentive bonus is not “damages for delay” within the meaning of such a provision. The Court also held that even if such a “no damages for delay” clause were applicable, there were factual issues in the record suggesting that an exception to the clause could apply as damages for uncontemplated delays, irrespective of cause, are recoverable under New York law. The Appellate Court then concluded that there were issues of material fact as to whether the contractor could have completed the west side work within 30 days. Specifically, the Court found that the contractor had offered evidence projecting that the work would have been completed in 23 days based upon the rate of completion actually achieved on the west side work, minus the days of delay caused by the City.

The Appellate Court thus overturned the summary dismissal of the trial court finding that the the incentive bonus was not barred by the “no damages for delay” clause.

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