Better Roads Digital Magazine
Issue link: http://read.dmtmag.com/i/393925
26 October 2014 Better Roads InCourt by Brian Morrow, P.E., Esq. Attorney Brian Morrow is a partner in Newmeyer & Dillion LLP and a licensed civil engineer specializing in construction law, including road and heavy construction. brian.morrow@ndlf.com I n a recent case involving no-damages-for-delay clauses – Zachry Construction Corp. v. Port of Houston Authority of Harris County, Aug. 29, 2014 – the Texas Supreme Court held a no-damages-for- delay provision in a construction contract by the Port of Houston was unenforceable. No-damages-for-delay clauses can be found in private construction contracts, and public construction con- tracts with state and local governmental entities. The federal government, however, does not use such clauses in its standard form contracts. No-damages-for-delay provisions legally excuse a party to a contract from li- ability that it would otherwise be exposed to in the event of a project delay. These clauses assist in avoiding liability for money damages for delay, disruption, or in- terference suffered by a contractor during performance of a contract. No-damages-for-delay clauses are often upheld as valid, though they are also strictly interpreted and limited to their terms. There are several recognized exceptions to no-damages-for-delay clauses, including delays not contemplated by the parties, active interfer- ence, unreasonable delays, and fraud or intentional misconduct. In the absence of a no-damages-for-delay clause, typical rules of contract law would impose li- ability for delay caused by another party. The use of no- damages-for-delay clauses represent an attempt by own- ers and prime contractors to avoid liability for damages relating to delay. In Zachry Construction Corp. v. Port of Houston Authority of Harris County, Zachry Construction contracted to construct a wharf on the Bayport Ship Channel for the Port of Houston. The contract included a no-damage- for-delay provision that provides: [Zachry] shall receive no financial compensation for delay or hin- drance to the work… The planned wharf was a concrete deck supported by piers. It would be used for loading and unloading ships carrying container goods. Its length was 1,660 feet — long enough for two ships to dock stern to bow. It would be built in five sections, each 135 feet wide and 332 feet long. The total cost was $62,485,733. Zachry planned on innovative construction, includ- ing installing a frozen earth wall that would allow it to perform the work in the dry." The company believed this approach would make the work less expensive and allow it to be completed more quickly. Work began in June 2004 and was to be completed in two years. But two sections of the wharf had to be completed by February 2006, so a ship from China could deliver cranes to be used on the wharf. The Port imposed liquidated damages of $20,000 per day for missing the deadlines. Nine months into the project, the Port realized that a sixth 332-foot section would have to be added to the wharf. To complete the two sections of the wharf need- ed by February 2006 and to continue to work "in the dry", Zachry proposed to build another frozen cutoff wall through the middle of the project, thus splitting the project into two parts. Zachry would finish the west end where the ship from China would dock, remove Delays and Disruptions Contractor prevails on no-damages-for-delay clause against Port of Houston