🔒Construction brings excitement, risk to Hartford

Scaffolding, cranes and inevitable construction project delays are once again in Hartford's future. There is a buzz in the air surrounding several large construction projects presently in the design or construction phase in and around Hartford.

Construction on the Yard Goats' ballpark is moving full speed ahead on the border of Hartford's North End as part of the new $350 million Downtown North mixed-use development plan. The University of Connecticut is also in the design development phase of UConn Hartford, where classes are expected to begin as early as fall 2017. A few other projects include Trinity College's purchase of the former Travelers Education Center at Constitution Plaza, the fairly recent completion of the XL Center's $35 million facelift, the $25 million Intermodal Triangle Project connecting Bushnell Park to public transportation, potential renovations to the Goodwin Square office tower and, of course, the much anticipated I-84 viaduct project.

While growth and construction is exciting and stimulates our local economy, it is important for those in the industry, including public and private owners, developers and contractors, to be mindful of the inherent costs associated with project delays. Public and private owners rely upon construction professionals to estimate the duration of a project so that associated hard and soft costs can be quantified and properly budgeted.

Many construction projects today consist of renovations to an existing building or involve multiple phases or projects managed separately as part of a single owner's construction program. It is very difficult for designers on such projects to account for and incorporate all existing conditions into their drawings and specifications and for contractors to anticipate all future coordination issues.

It is also challenging at the onset to predict weather, labor conditions, the availability of raw materials and other factors that might effect a project's duration. These unknowns often result in unanticipated project delays, acceleration or other impacts that affect all the parties in the construction pyramid.

However, there are many different ways to allocate and transfer the risks associated with project delays within a construction contract. Two of the most common provisions for doing so are “No Damages for Delay” clauses and “Liquidated Damages” provisions.

No Damages for Delay clauses typically protect an owner from increased costs resulting from construction delays by restricting a contractor's ability to recover for overhead, general conditions and other extended-duration costs attributable to delays for which the contractor is not responsible. This provision limits a contractor's remedy for delay to an extension of the completion date and prohibits the recovery of money damages.

These clauses are enforceable in most states unless the contractor can establish that the party seeking to invoke the clause “actively interfered” with the contractor's ability to perform its work. There are volumes of treatises and case law throughout the United States attempting to define active interference, but it is generally considered a willful act taken in bad faith to interfere with a contractor's ability to comply with the terms of the construction contract.

In today's economy, No Damages for Delay clauses are often found in construction contracts alongside Liquidated Damages provisions that protect and compensate the owner for project delays caused by the contractor. A Liquidated Damages clause sets, or liquidates, the amount of damages, usually on a daily basis, that the owner will recover for project delays attributable to the contractor.

Generally, damages can be liquidated if the actual injury to the owner is uncertain or difficult to ascertain and the amount set is reasonable. Such clauses will not be enforced if the clause operates as a penalty. In other words, if no rationale exists between the owner's actual damages and the amounts recoverable under the clause, a court will likely refuse to enforce the clause.

Another clause that affects the ability of both a contractor and owner to recover damages attributable to construction delays is a “Waiver of Consequential Damages” provision. Many form agreements, including some of those prepared by the American Institute of Architects, contain a “mutual waiver” of consequential damages so that neither party can recover these categories of damages from the other.

It is crucial for all project participants to have an open and informed discussion about unanticipated delays at the commencement of every project and to allocate the risks and costs within their written contracts. 

Peter E. Strniste Jr., is a partner with the law firm of Robinson+Cole. He can be reached at pstrniste@rc.com.

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