Chapter 18 - § 18.13 • CONTRACTOR CLAIMS

• Jurisdiction: Colorado

§ 18.13 • CONTRACTOR CLAIMS

Particularly with respect to public contracting at the federal level (also known as government contracting), the law governing contractor claims³⁵⁷ is both complicated and well developed. Generally, the claims are based upon a specific type of contract breach. Each type of contract breach has different elements of proof and different damages. Colorado case law with respect to the various claims frequently asserted by contractors is understandably less well developed. For instance, it does not appear that Colorado has any reported decisions that have directly addressed claims for "disruption," "acceleration," or "cardinal change."³⁵⁸ Thus, it is beyond the scope of this section to address in detail the commonly asserted contractor claims. Rather, it reviews a number of decisions that provide some guidance as to how contractor claims have been treated by Colorado courts.

§ 18.13.1-Delay

If a construction project takes longer than reasonably anticipated by the contractor or as required by a contract, additional costs are typically incurred by the contractor and its subcontractors. This is based on the self-evident proposition that "time is money." As long as a contractor is on a project, it is devoting physical and labor resources to it. If performance is delayed, costs above and beyond those included in the original contract can be, and usually are, incurred. A project may be delayed for numerous reasons, such as contractor inefficiency, defective plans and specifications, labor shortages, material shortages, and/or unusually severe weather.³⁵⁹

When (1) delay is caused by the owner or something or someone within the owner's control, (2) the delay results in additional costs to the contractor, and (3) the contractor has not assumed the risk of the delay, the owner's action (or inaction) entitles the contractor to increased costs due to the delay and a time extension. The contract need not state that the contractor is entitled to recover for owner-caused delays, because this is an implied warranty in every contract.³⁶⁰

Although Colorado has a few reported cases where delay damages were claimed and/or awarded, none of the cases provides a detailed description of the elements necessary to prevail. Nevertheless, the decisions do suggest that Colorado courts recognize the cost impacts occasioned by delay and that they are willing to award delay damages if sufficient proof has been provided as to who is responsible for the delay and the costs incurred as a result of the delay. However, if an owner fails to apportion the entire delay to the project between itself and the contractor, it will be precluded from recovering delay or liquidated damages.³⁶¹

In Concrete Contractors, Inc. v. E.B. Roberts Construction Co.,³⁶² a subcontractor alleged that a general contractor had wrongfully terminated its contract. The trial court agreed and awarded the subcontractor damages.³⁶³ Although the contract did not specify the time for performance, the general contractor contended that the termination was justified based on the subcontractor's untimely performance.³⁶⁴ In affirming the trial court's conclusion, the court of appeals determined that the evidence supported the trial court's decision that the subcontractor's delays were not unreasonable and were due to weather conditions, actions by the general contractor, and other things beyond the subcontractor's control.³⁶⁵

A contrary result was reached in R.A. Reither Construction, Inc. v. Wheatland Rural Electric Ass'n,³⁶⁶ where a contractor's delay claim against an engineering firm was denied because the contractor failed to provide evidence as to the delay allegedly caused by the engineering firm. Likewise, in Wilson & Co., Engineers & Architects v. Walsenburg Sand & Gravel Co.,³⁶⁷ although a contractor prevailed on its claim that its engineering subcontractor had breached its contract, damages for lost rental revenue caused by idle equipment as a result of the subcontractor's delays were speculative and unrecoverable. The contractor failed to submit any evidence that third parties were ready and willing to rent the equipment if it had been available.³⁶⁸

A prime contractor, under certain circumstances, may be able to recover attorney fees awarded against it pursuant to a subcontract from an owner for delays caused by the owner. In David C. Olson, Inc. v. Denver & Rio Grande Western Railroad Co.,³⁶⁹ a general contractor was awarded a portion of the attorney fees incurred by a subcontractor in pursuing a claim against it. Improvements to a tunnel project were delayed for 15 months, causing both the general contractor and subcontractors to incur substantial additional costs.³⁷⁰ The contractor alleged the delays were caused by the railroad and defective work of the subcontractor.³⁷¹ The trial court found that the railroad was responsible for the delays, and thus the additional costs of both the contractor and subcontractor, as well as that portion of the subcontractor's attorney fees awarded against the general contractor for prosecution of the subcontractor's delay claim.³⁷² In affirming the judgment, the court of appeals determined that there was not an award of attorney fees per se; rather, the award was based on the judgment entered against the general contractor.³⁷³ "A judgment against the prime contractor for attorney fees under the sub-contract was a natural and reasonably foreseeable result of the railroad's breach of contract."³⁷⁴ Thus, the railroad was responsible for those fees.

An owner may also recover damages caused by a contractor's delay. Where the construction of a motel was delayed by construction defects and other problems, the owner sued the contractor for breach of contract.³⁷⁵ The owner claimed as damages the additional interest costs it incurred because of the delays.³⁷⁶ Although the claim for interest costs was dismissed based on the statute of limitations, by addressing the claims, the court implicitly recognized that the claim was viable. Thus, if a contractor delays a project, in the absence of an enforceable liquidated damages provision, an owner should be able to recover those damages reasonably and foreseeably caused by the contractor's delay, including, among others, additional interest costs. Where delays are caused by the owner and contractor, the delays must be apportioned in order to recover delay damages or liquidated damages.³⁷⁷

The parties to a construction contract may negotiate away their right to receive damages based upon delay. "No damages for delay" clauses are valid and enforceable in Colorado.³⁷⁸ Such clauses are strictly construed against the owner or contractor.³⁷⁹ Courts in other jurisdictions have recognized several exceptions to "no damages for delay" clauses.³⁸⁰ The most widely recognized exception is for fraud, misrepresentation, or bad faith.³⁸¹ The "active interference" exception, which applies when a contracting party has affirmatively or directly interfered with the work of a contractor, was recognized and addressed in Tricon Kent Co. v. Lafarge North America.³⁸² There, the court held that a contractor claiming active interference need only "show that the defendant committed an affirmative, willful act that unreasonably interfered with the [contractor's] performance of the contract, regardless of whether the act was undertaken in bad faith."³⁸³ However, active interference "requires more than a simple mistake, error in judgment, lack of total effort, or lack of complete diligence."³⁸⁴

Public entities in Colorado are statutorily precluded from incorporating a "no damages for delay" clause into their construction contracts.³⁸⁵ However, public contracts may require contractors to provide notice of any alleged delays and may impose reasonable liquidated damages for contractor-caused delays.³⁸⁶

§ 18.13.2-Disruption

A "disruption" claim differs from a "delay" claim.

Disruption on a construction project can be defined as a material alteration of the performance conditions expected at the time of bidding such that the performance conditions

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