Section 12.12 No Damage for Delay Clauses

• Library: Construction Law 2016 Supp

A. (§12.12) No Damage for Delay Clauses

Another common source of dispute is the “no damage for delay” clause, which seeks to insulate the owner from all delays experienced on a project. The major standard industry-wide contract forms (federal, AIA, EJCDC) allow recovery of damages for delay caused by others. No damage for delay clauses are disfavored because, ultimately, contractors will build the risk into their bids, thereby driving up the owner’s cost. Some project owners believe that it is better to pay if a delay arises than to buy insurance from the onset.

Nonetheless, many public and private project owners include “no damage for delay” clauses in their contracts under the belief that their cost exposure will be reduced or to eliminate the need to predict or provide for this cost in the budgetary process. One court, in response to that philosophy, has stated:

[I]f the Government got such an immunity [from damages for delay], it bought it by requiring bidders on a public contract to increase their bids to cover the contingency of damages caused to them by the negligence of the Government’s...