Delays happen all the time in the construction industry and can be caused by everything from poor weather conditions to conflicts with contractors and subcontractors.
Regardless of your role in a project, you should be well aware of the contract language on delays and be prepared to respond accordingly.
What legal solutions are provided by the construction contract?
Contract termination
Cases where a lack of compliance or breach is so serious that the contract can be terminated tend to be very rare. Construction contracts are usually written to treat termination as a last resort and provide other ways to handle delays and get the project back on track. Unless one party is completely unable to deliver on their product or service, even with delays, it is unlikely that the contract can be terminated.
Provisions Addressing Delays
Usually, the construction contract will contain provisions specifically to respond to delays i.e. requiring the contractor to expedite their schedule and add workers if necessary. In such cases, additional costs will likely be incurred and contract language varies on methods for recovery.
Generally, one party can seek compensation for costs incurred due to delays caused by another party. One obvious example is the project owner pursuing damages from a general contractor. However, it is also possible that one subcontractor can recover damages from the owner and/or general contractor for project delays caused by another subcontractor.
It is important to note though that the contract may stipulate that damages must be collected from the responsible party first. In the above scenario, in order for the subcontractor that incurred additional costs to recover damages, the owner and/or general contractor must be paid from the responsible subcontractor first.
Additionally, when seeking compensation for additional expenses, you must act according to contract requirements for doing so. There may be language requiring a certain amount of notice or written agreement from the owner for those expenses. Not complying could result in no compensation.
Because delays are so common, it is critical for every party involved to have read and accepted all of the contract’s clauses and provisions before proceeding.
For additional risk management information and resources for the construction industry, please contact an Acera Insurance advisor.
Source: “Time Is Money – Remedies For Delay In Construction Projects” by Kelly Hannan and Alex Norris of Burnet, Duckworth & Palmer LLP (December 29, 2016).