U.S. District Court in Kansas Eschews Application of Traditional Exceptions to No-Damages-For-Delay Clause

Law Co. v. Mohawk Construction & Supply Co. Inc.
2010 U.S. Dist. LEXIS 24302 (D. Kan. March 16, 2010)

The United States District Court for the District of Kansas recently considered the enforceability of a no-damages-for-delay clause in a construction subcontract. After finding that the clause was enforceable, the Court rejected each of the exceptions urged by the subcontractor.

The matter before the District Court involved a series of contracts entered into with regard to the construction of a Cessna C-10 Citation Service Center in Wichita, Kansas (the “Project”). The project owner, Cessna Aircraft Company, retained plaintiff, The Law Company, Inc. (“Law”), to provide general construction services in connection with the Project. In turn, Law, entered into a series of subcontract agreements, including one with Mohawk Construction and Supply Company, Inc. (“Mohawk”). Mohawk’s subcontract contained a no-damages-for-delay provision, particularly providing that Mohawk’s sole remedy for delay was an extension of time.

During the Project, delays in steel erection impacted the work of other subcontractors, including Mohawk. Law repeatedly put the steel erector on notice of the delays, the impact of such delays on the overall construction schedule, and that it would be held responsible for additional costs incurred as a result of its delays. Likewise, Mohawk informed Law on several occasions of its intention to seek additional compensation for the impacts the delays had on its work.

Ultimately, Law brought an action seeking a declaration that Mohawk was barred from collecting delay damages under its subcontract; Mohawk counterclaimed for those delay damages. Law moved for summary judgment seeking dismissal of Mohawk’s counterclaim asserting, among other things, that the no-damages-for-delay provision barred Mohawk from recovering damages for delay. Mohawk did not challenge the validity of the no damages for delay clause, but argued that one or more exceptions to the enforceability of such clauses was applicable. Among the exceptions asserted by Mohawk were (1) fundamental breach by the other party; (2) uncontemplated delay; (3) unreasonable delay; (4) active interference; and (5) the damages asserted by Mohawk were not delay damages, but of another kind.

After finding that the no-damages-for-delay provision at issue was valid and enforceable standing alone, the Court considered each of the exceptions cited by Mohawk at length, finally holding that none of the exceptions were applicable. With respect to the fundamental breach exception, the Court differentiated the cases cited by Mohawk and narrowly construed the applicability of the exception to those circumstances where the delay completely frustrated project construction, which the Court found was not met in this case.

Next, the Court focused on the language of the particular subcontract clause at issue in rejecting the uncontemplated and unreasonable delay exceptions, reasoning that the language was unambiguous in excluding damages for delay. According to the Court, to allow the parties to argue that a delay was unreasonable or uncontemplated would defeat the very purpose of such clauses — to reduce the opportunity for second-guessing after the fact. The Court further opined that Mohawk could have negotiated a ceiling on the maximum allowable delay or in the alternative adjusted its contract price to allow for the uncertainties of delays.

Likewise, the Court rejected both the active interference and non-delay exceptions cited by Mohawk. The Court held that these two exceptions were really just the same arguments made under two different headings, and found that Mohawk failed to provide evidence showing Law acted intentionally or in bad faith to create delays.

In refusing to recognize the exceptions urged by Mohawk, the district court appeared to be less receptive to the applicability of the exceptions urged by Mohawk than courts in a number of other jurisdictions.

Click here to view full text of decision courtesy of LexisNexis.

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