Texas Supreme Court Hears Arguments in Case on "No Damages for Delay" Clauses

On November 6, 2013 the Texas Supreme Court heard oral arguments in Zachry Construction Company v. Port of Houston Authority of Harris County, Texas, a case that could have severe ramifications for contractors and subcontractors state-wide.

At issue is whether or not an owner can include clauses in their contracts that essentially protect them from ever having to pay delay damages, even when the owner's actions are intentionally or unintentionally responsible for the delay. In other words, the Texas Supreme Court will eventually rule whether "no damages for delay" clauses in construction contracts extend to delays caused, willfully, by the owner.

A lower court, the 14th Court of Appeals of Texas, ruled that they did in August 2012: according to the American Subcontractor's Association (ASA), the court found that Zachry Construction Co. could not recover damages related to a delay that was caused by the owner's breach of contract because of the presence of a "no damages for delay" clause. The court argued that "parties strike the deal they choose to strike and, thus, voluntarily bind themselves in the manner they choose."

According to Chris Ring of NACM's Secured Transaction Services (STS) "general contractors, subcontractors and material suppliers need to pay particular attention to and support ASA's arguments to overturn the 'no damage for delay ruling,' for if this ruling stands, an owner has the ability to willfully and negligently delay a project with limited or no recourse from downstream contractors and suppliers."

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- Jacob Barron, CICP, NACM staff writer

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