Schedule and Delay Clauses in Construction Contracts

posted by Michael Fortney  |  Dec 15, 2009 10:06 PM in Construction Law

The schedule for completion of the contract work is an essential component of the contract, and a frequent focus of construction litigation.  In a perfect world, the contract will incorporate a detailed computer generated completion schedule, with milestone dates for the essential tasks, and the schedule will be updated periodically to reflect changes in the schedule to reflect changes and progress.

At a minimum, the prime contracts should include a date of commencement of the work, a project duration (the time that the prime contractor agrees to reach substantial completion of its scope of work), and a definition of substantial completion.  

The date of commencement is subject to change, based on several factors.  The most common factors affecting the date of commencement influenced by the owner are owner funding, the delivery of final plans and specifications, the availability of the building permit.  Changes in the date of commencement change the date of substantial completion.

The project duration is measure either in calendar days or working days, and is based on the number of days that the parties predict it will need to complete the project.  Project duration is subject to lengthen based on several factors: changes directed by the owner, unforseen conditions, force majeure, weather, contractor issues.

No damage for delay clause

The Fairness in Contracting Law prohibits no damage for delay clauses, when the reason for the delay is the result of the owner's [or contractor's] act or failure to act.  Ohio Revised Code §4113.62.  Defective plans and specifications are the leading reasons for owner-caused delay damages and time extensions in Ohio.  To recover delay damages, a contractor must establish that (a) the owner breached the contract, (b) the breach caused a delay to the contractor's performance, and (c) the contractor was damaged.

Liquidated damages clause

The clauses are generally enforceable.  Courts consider liquidated damages to be appropriate for remedying delays in the construction industry.  

To be enforceable, the owner must establish (a) the actual damages would be difficult to ascertain, (b) the liquidated damages bear a reasonable relationship to the actual damages, and (c) the contract provision evidences that the parties intended to consider and adjust the damages that might occur from delays or other breaches.  Courts will invalidate any liquidated damages clause that is deemed to be a penalty.  

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