Chapter 27 - § 27.3 • KEY CONTRACT CLAUSES

• Jurisdiction: Colorado

§ 27.3 • KEY CONTRACT CLAUSES

§ 27.3.1-Time Is of the Essence

Most construction contracts include a clause that provides that time is of the essence. A typical time-is-of-the-essence clause will provide:

Time limits stated in the Contract Documents are of the essence of the Contract. By executing the Agreement, the Contractor confirms that the Contract Time is a reasonable period for performing the Work.¹⁵

This clause becomes particularly important in the context of a delay claim because a party who caused delay on a construction project may be in breach of the time-is-of-the-essence clause. Where time is expressly of the essence in a contract, and a contractor does not perform in a timely fashion, the owner has a right to refuse to perform its obligations under the contract and may rescind the agreement.¹⁶ Furthermore, this clause makes the other clauses regarding schedule, delay, and time extensions contract requirements that are material to the contract.¹⁷ Therefore, if a construction contract includes a firm completion date, the existence of a time-is-of-the-essence clause becomes quite important. On the other hand, if a contract lacks a time-is-of-the-essence clause, time is not a material term of the contract¹⁸ and a reasonable time for completion is implied - as measured by the factual circumstances of the case.¹⁹ Thus, in the absence of the clause, the owner may not be able to recover damages if the contractor fails to meet a firm completion date.

§ 27.3.2-Time for Completion of the Contract

Construction contracts typically provide a date by which the contractor must complete its work under the contract. This substantial completion date may be tied into various aspects of the project. The standard AIA contracts define "substantial completion" as "the stage in the progress of the Work when the Work . . . is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work for its intended use."²⁰ Some public contracts for construction in Colorado define "substantial completion" as "the date when the construction is sufficiently complete, in accordance with the contract documents, as modified by any change orders agreed to by the parties, so that the work . . . is available for use by the owner."²¹ Absent a contract term defining substantial completion, substantial completion is generally deemed to have occurred when the deviations from final completion do not materially interfere with the owner's use of the property and can be conveniently remedied.²² Thus, ascertaining when substantial completion has been achieved often centers on determining whether the remaining work constitutes "punch work."

"Substantial completion" is the point in time against which delay claims are measured. Thus, the definition of what constitutes substantial completion is pivotal in a schedule or delay claim.

§ 27.3.3-Schedule Clause

Some construction contracts mandate the type of schedule the contractor prepares and maintains on the project. The standard construction industry contracts require the contractor to prepare and submit a schedule to the owner or owner's representative for review and approval within a certain number of days from contract award. Contracts will also require the contractor to submit periodic updates to the schedule and conform his or her work to the schedule. An example of a schedule clause may be found at AIA Document A201-2017, General Conditions of the Contract for Construction, § 3.10.²³

§ 27.3.4-No-Damages-for-Delay Clause

Generally, if the owner is responsible for a delay in the schedule for a project, then the owner is liable to the contractor for delay damages. The no-damages-for-delay clause attempts to relieve the owner of liability for delays the owner causes and bars the contractor from recovering damages resulting from the owner's delay of the project. Fortunately, the clause does typically provide the contractor an extension of time for delays in the work. For example, a no-damages-for-delay clause may include the following:

If the Contractor's performance is delayed or disrupted by the actions or inactions of the Owner, the Owner's forces or contractors, or anyone for whom the Owner may be responsible, then the

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