No Damages for Delay Provision Saves Contractor’s Delay Claim from Notice of Claim Provision

In Huen New York, Inc. v. Board of Education Clinton Central School District, Supreme Court, County of Oneida, Index No. CA2005-001680, Greenberg, Trager & Herbst, LLP represented Huen New York, Inc. (“Huen”), the prime contractor for the electrical work on a large new construction project for the School District, which was to be completed in two phases (“Project”). Huen’s work on the Project was scheduled to be completed in January 2003, but was actually completed in September 2004. Thereafter, Huen brought a claim against the School District for delay damages.

The contracts between Huen and the School District (“Contract”) contained the following provision:

4.3.2 Time Limits on Claims. Claims by either party must be initiated within 21 days after occurrence of the event giving rise to such Claim or within 21 days after the claimant first recognizes the condition giving rise to the Claim, whichever is later. Claims must be initiated by written notice to the Architect and any other party.

Section 4.3.1 of the Contract defined a Claim as “a demand or assertion by one of the parties seeking, as a matter of right, adjustment or interpretation of the Contract terms, payment of money…or other relief with respect to the terms of the Contract”.

The Contract also contained a no-damages-for-delay provision, which provided in part:

…Except to the extent, if any, expressly prohibited by law, Contractor expressly agrees not to make, and hereby, waives, any claim for damages, including those resulting from increased labor or material cost, on account of any delay, obstruction or hindrance for any cause whatsoever…

These types of provisions are prevalent in public works contracts and many private sector contracts.

Huen had filed its delay claim pursuant the law enunciated inCorinna Civetta Construction Corp. v. City of New York, 67 N.Y.2d 297, 502 N.Y.S.2d 681 (1986), and its progeny, which hold that notwithstanding a no-damages-for-delay provision in a construction contract, a contractor may recover damages for (1) delays caused by an owner’s bad faith or willful, malicious, or grossly negligent conduct, (2) uncontemplated delays, (3) delays so unreasonable that they constitute an intentional abandonment of the contract by the owner, and (4) delays resulting from the owner’s breach of a fundamental obligation of the contract.

After Huen filed a Note of Issue, the School District, inter alia, moved for summary judgment to dismiss Huen’s delay claim on the ground that Huen had failed to comply with the 21-day written notice of claim provision of the Contract. The Supreme Court granted the School District’s motion for summary judgment and dismissed Huen’s complaint, holding that Huen had not complied with the 21-day notice provisions of the Contract for its delay claims. The Supreme Court held that compliance with the notice provision was required as a condition precedent to the lawsuit.

On appeal, Huen argued, inter alia, that since the no-damages-for-delay provision precluded claims for delays under the Contract, the 21-day notice provision of the Contract did not apply to Huen’s delay claims since the Contract precluded Huen from filing or making delay claims, i.e., the delay claims seek relief outside the scope of the Contract under Corinna Civetta, supra.

In Huen New York, Inc. v. Board of Education Clinton Central School District, 67 A.D.3d 1337, 890 N.Y.S.2d 748 (4th Dept. 2009),leave to appeal denied, 70 A.D.3d 1519 (4th Dept. 2010), the Fourth Department, accepting Huen’s arguments, unanimously reversed the Supreme Court and reinstated Huen’s complaint holding:

In light of the fact that article 8 of the contracts specifically precludes delay damage claims, except to the extent prohibited by law [citing Corinna Civetta, supra], we conclude that [Huen’s] request for delay damages is not a demand premised, as a matter of right, on the terms of the contract. To the contrary, [Huen’s] request for delay damages seeks relief wholly outside the scope of the contracts.

The Fourth Department’s Decision and Order appears to be the only New York case which holds that where a contract contains a no-damages-for-delay provision, the contractor is not subject to notice of claim provisions in the same contract for delay damages premised on Corinna Civetta, supra.

It is noted that upon remand and prior to trial, Huen successfully negotiated a settlement with the School District.