An electrical contractor once suffered a loss equal to one-third of its original contract. Neither extra nor changed work caused the loss. It was the result of the general contractor terribly mismanaging a job. The terms of art often applied to the resulting claim include delay, disruption, acceleration, out-of-sequence work, stacking of trades and interferences between trades. This electrical contractor used the words “hopscotch” and “piecemeal.” 


Anyone who has ever been involved in this kind of claim knows how difficult it is to prove damages. How do you calculate labor losses from start-and-stop work, double-handling of materials and shifting of crews? These losses are commonly categorized as loss of efficiency, but in many ways, this heading is misleading. It is not so much that the electricians are inefficient while they are working. It is that they cannot get to the work to get it done. Time is lost waiting, getting reassigned to other areas, getting access to work areas, and other mobilization/demobilization cycles. There also are the real costs associated with loss of learning curve and morale.


Techniques have been developed for approximating the cost effects of job disruptions. These include estimates by productivity experts, using historic averages for the ratio of manpower per unit of work and “measured mile.” In contract law, courts accept these estimates and calculations even though there may be a lack of mathematical precision. The idea in the law is that, if a contractor can prove a breach of contract, it will not be denied recovery because the calculation of damages is inexact. 


All of these elements were present in the 2015 case of Electrical Contractors Inc. (ECI) v. Whiting-Turner Contracting Co. (W-T). The plaintiff, ECI, had proof that W-T and the owner had major disputes over the project scheduling and management. As a result, areas of the work were alternatingly delayed and accelerated. W-T’s superintendents ignored the project schedule, which was defective in any case, and gave daily directions to ECI, causing the electrical work to be done piecemeal. W-T changed the sequences of the work so the crews had to “hopscotch” around the construction. These problems worsened as the job progressed. 


ECI regularly notified W-T of the job disruptions verbally, by notes that were sent to W-T, in daily reports sent to W-T, by emails, in weekly reports, and by formal letters. As the job neared completion, ECI formalized these claims into a Request for Equitable Adjustment for impact damages. 


Regardless of whether ECI would have been successful at trial had it been able to present its case, it was not permitted to do so. A no-damage-for-delay clause in the contract destroyed ECI’s seemingly valid and justified claim. That provision states: “Contractor shall have the right at any time to delay or suspend the work or any part thereof without incurring liability therefor.” When the court read this clause in conjunction with the contract’s other provisions, the court interpreted this clause to cover out-of-sequence work, discontinuous work and acceleration. The court ruled that the “Subcontract provides no legal basis for ECI’s claims for the increased costs that it incurred while performing its base contract work, including costs incurred ... as a result of labor inefficiencies owing to W-T’s mismanagement of the project.” 


In other words, the no-damage-for-delay clause protected the general contractor even when it acted negligently or grossly mismanaged construction. Obviously, this holding is one of importance for electrical contractors to know before signing an agreement with such a clause. However, if it is too late, and you did not delete the clause before you signed, you may wonder if there are any exceptions. There are, but they are very limited and hard to prove. Among the exceptions are active interference and delays beyond the contemplation of the parties. Neither of these exceptions is simply defined. 


In the case of ECI, the electrical contractor alleged that W-T breached an implied covenant (promise) of good faith and fair dealing. The court stated that a breach of this covenant might be an exception to the no-damages-for-delay clause, but there are two major hurdles to overcome. First, a breach of a duty of good faith essentially means that a party acted in bad faith. Bad faith is a concept akin to fraud or actions taken with an ulterior motive or malice. Direct proof of bad faith is not usually available, so it must be established by more indirect evidence.


Secondly, bad faith does not exist alone. It must be bad faith in doing something or not doing something, and that “something” is subject to the contract’s written notice clause. For example, let’s say the general contractor orders you, the electrical sub, to perform work in an area that is not ready for electrical work. You could argue that this order entitles you to be paid for your lost time, but the no-damages-for-delay clause does not permit you to make this claim. So, you argue that the general knew, when it issued its order, that sending your crews to another work area would be a useless effort and did so just to harass you. Now you are getting close to bad faith. Still, to preserve your claim, you would have to send a written notice of the harm done by the order.


That was part of the court’s ruling in the ECI case—that the electrical contractor was required to issue a written notice of claim within seven days of the occurrence of the event giving rise to the claim. The contract not only required notice but also a claim for a specific dollar amount with supporting documents. ECI did not send these notices within a week each time its work was disrupted. 


A number of states and the federal government have determined that a no-damage-for-delay clause is unfair and against public policy, and, by statute or regulation, many government entities are prohibited from using such a clause in their agreements with general contractors. There is no such restriction on general contractors. The exceptions to the clause, which have found application in cases throughout the country, are inconsistently applied and, even then, only address the most egregious circumstances. 


Because no-damage-for-delay clauses are enforceable, an electrical subcontractor should try to eliminate the clause during contract negotiations. If wholesale deletion cannot be achieved, there may be ways to modify the clause so that it is more limited than the one in the ECI case. If an ECI-type clause or a variation of it is in your contract, you should strictly follow the clauses applying to time extensions and extras so that you are not barred by lack of written notice. You want to ensure that, if you can prove one of the exceptions to the clause, you are not denied recovery because of a failure to notify the general contractor of your claims in a timely fashion.