Delay Damages: What are They and How do They Work?

Construction delays. While the phrase may seem obvious and they are some of the most common disputes in the construction industry, they are also some of the least understood and complex claims in the field. This article provides a brief overview of what a delay claim is, common points of contention, and how you can avoid finding yourself on the wrong side of a delay dispute.

Construction Delay Claims

Virtually every construction project encounters delays. Typically, such delays relate to some unanticipated event or changed circumstance that extends the project or prevents part of a project from being completed as originally planned. Some delays may be unavoidable, in which case it may often require the parties to reach an agreement or cancel the contract all together. It is also often the case that such a delay is avoidable, and in such a circumstance the contractor should be liable for the delay. The terms under which the delay is reasonable, and what should come from a delay, should be spelled out clearly in the construction contract.

If, under the contract, one party believes that the delay was avoidable, a delay claim to recoup additional costs should be filed.

Types of Construction Delay Claims

Generally, in the field of construction law, there are three categories of delays: excusable, inexcusable and concurrent. Excusable delays are those in which the contractor has no control, and it is very unlikely that the contractor will be entitled to any damages from the owner. Excusable delays include circumstance that are beyond the contractors control or unforeseen by either party when the contract was agreed upon. Such examples of an excusable delay include design errors, owner-initiated changes, unanticipated weather, or acts of God.

Conversely, inexcusable delays are those in which the contractor has assumed the risk under the contract and will likely not be compensated for the delay. In other words, the delay is due to a circumstance under which the contractor had control and could have avoided. A few examples of inexcusable delays include, mismanagement, permits and approvals, or labor issues. When filing a construction delay claim, it is typically because of an inexcusable delay by the contractor. Depending on the specific terms of the contract, the delay may be compensable to the owner through either the payment of liquidated or actual damages by the contract. Due to the nature of these claims and the circumstances surrounding them, engaging an attorney early in the process is vital.

Additionally, given the complexity of construction projects, parties may be faced with a combination of both excusable and inexcusable delays that impact the work at the same time. These are referred to as concurrent delays. The delay may be due to a variety of issues and may be caused by different parties, the same parties, or circumstances directly caused by neither party at all. As may be expected, these types of delays can be tricky and confound the ability to make a delay claim for damages.

How to Handle a Delay Claim

As noted above, determining the type of delay claim can be difficult. It will depend on a thorough understanding of both the construction contract itself, as well as the circumstances surrounding the claim.For these reasons, the two most important things to consider when such a circumstance arises are documentation and notification. Courts and arbitrators take several factors into considering when hearing delay claims, including the cause of the delay, the obligations of the parties under the contract, and how risk has been allocated to the parties. All of this means that documenting everything is vital. Documenting causes, times, weather conditions, communication, length of delay, etc. may be the difference between a winning and losing claim. Second, it is important to notify your lawyer early in the process. Your lawyer can help understand your obligations under the contract, and assist in determining the type of claim that may be made.

Should you have any questions or you would like to discuss this issue in further detail, please do not hesitate to contact us to schedule a free consultation.