Damages for Delays in Construction Projects
Best practices for recovering damages for delays in construction (and avoiding them altogether)
Construction projects are complicated undertakings from the standpoint of both owners and contractors. One aspect that we have to anticipate – and which is most frequently the subject of dispute, disagreement, conflict and stress for the parties – is the scheduling of the work and the timely completion of the project.
Time is money. Delays in construction put all parties at risk.
Owners want their building, home or remodeling project completed on a certain date so they can get on with the new phase of their businesses or lives that inspired the construction project.
The contractors or subcontractors want to complete the project and make a fair profit. To do that, they have to anticipate the amount of time it will take to complete the project efficiently so that costs can be controlled to protect the bottom line. If the contractor has to increase his workforce or pay his labor overtime to complete the project on schedule, or needs to interrupt and reschedule subcontractors because of unanticipated deficiencies in the owner’s architectural plans, his profit can be reduced, disappear or worse.
The contractor can be responsible for the damages caused to the owner because the owner was unable to use the completed project during the delay period.
If the owner causes the delay and the additional expense, the contractor’s claim can result in substantial increased costs of the project to the owner and the potential of the owner to lose its property through the foreclosure of the contractor’s mechanics lien claim.
The damages can be substantial and disastrous to either party. It is important for the parties in any contract of significant size to address the possibility of construction delays and how they are going to deal with them in their contract.
Anticipate Delays in Construction through Careful Drafting in the Contract Phase
Construction attorneys incorporate terms in the construction contract to provide their clients reasonable rights to be compensated if the project is delayed. A well-drafted contract incorporates procedures and practices for the parties to follow so that delays are documented and so is compliance with the construction schedule.
Following are some of the issues the parties will want to consider, preferably at the contract stage, rather than when a delay problem rears its ugly head while the project is underway:
- Does the contract state a time that the project is to be completed? If not, the law will imply a “reasonable time” which can be expensive and time consuming to establish.
- There are two main categories of delay: Excusable or Nonexcusable
- Excusable delays are delays in the project that aren’t any party’s fault, for example: natural disaster, unusually bad weather, acts of God; or they aren’t the fault of the contractor who is delayed.
- Excusable delays outside of everyone’s control: contractor usually gets additional time to perform the work.
- Excusable delays under the control of the owner can result in construction delay damages to the contractor.
- Nonexcusable delays are delays caused by or within the control of the contractor. Nonexcusable delays can result in damages for delays in construction paid by the contractor.
- Recovering Damages for Delay requires that both the delay and the damages be documented.
- How do you document a construction delay? Active and organized record keeping is the key to success on a claim for construction delay damages. Below are examples of the type of documentation that we use to prosecute or defend such a claim:
- Initial Project Schedules and updated Project Schedules
- Contract time schedule
- Change Orders either unilateral or bilateral
- Project meeting minutes
- Requests for Information
- Architects Supplemental Instructions
- Daily job logs
- Inspection Reports
- Invoices and Orders from subcontractors and vendors
- Daily reports of the presence of equipment, labor and subcontractors on the site
- Daily reports, time cards, timesheets or other labor records
- Foreman logs
- Photographs and videos of work in progress
Construction projects require the coordination of multiple parties and can involve complex issues of design, workforces of the different parties, availability of materials, and environmental conditions – as well as the weather and other factors outside of the control of the project participants.
Delays in construction have to be anticipated at the contract phase of the project and in the system of documenting the progress of the project. If this risk is ignored either by failing to address how delays will be handled in the contract or by failing to sufficiently document the progress of the project, the real danger is that the party responsible for the delay will escape liability and an innocent party will experience financial disaster.
Put Your Construction Project on Course for a Win-Win Situation
We talk to contractors, subcontractors and owners about these issues all the time. If you would like to talk with us about a construction project you are considering or a project that you are involved in that is experiencing delays in construction, we would be happy to talk to you about your questions.