Owners often require general contractors they hire to perform construction services to agree to waive their rights to recover delay damages. General contractors in turn require their subcontractors to agree to the same. When a contractor’s work is significantly delayed by others, this can result in catastrophic financial losses to the contractor.
Fortunately, the Texas Supreme Court recently held that there are exceptions to the enforceability of these no delay damages clauses. The court held that the exceptions to their enforceability include when the opposing party causes the delay or hindrance by engaging in arbitrary and capricious conduct, active interference, bad faith or fraud. (See Zachry Const. Corp. v. Port of Houston Auth. of Harris County, 449 S.W.3d 98, 104 (Tex. 2014), reh’g denied (Dec. 19, 2014)).
Lessons learned are that if you are a contractor, you should avoid signing a contract that contains a blanket waiver of the right to recover delay damages. However, even if you have agreed to this type of clause, all may not be lost if you sustain delay damages. You will just have to submit proof that one of the common law exceptions applies to the enforceability of the clause.