Construction Law Blog
Under Pennsylvania law, a “no damages for delay” provision like this one is considered an exculpatory clause; subject to stringent standards in order to be enforceable. See Keystone Aeronautics Corp. v. R.J. Enstrom Corp., 499 F.2d 146 (3d Cir. 1974). Thus, the party asserting it must prove, among other things, that the contract: (1) does not contravene public policy; and (2) relates solely to the private affairs of the contracting parties. See Valhal Corp. v. Sullivan Assocs., Inc., 44 F.3d 195 (3d Cir. 1995). In Spearly, the Court refused to find that the District’s contract was only related to the “private affairs” of the contracting parties. See also State Pub. Sch. Bldg. Auth. v. Goodea Constr. Co., 24 Pa. D. & C. 3d 648 (Pa. Com. Pl. 1981) (proper construction of public school buildings is a matter of interest to the public or state). Therefore, the Court construed the contract against the District (i.e., the party seeking immunity) and held that delay damages were available to the contractor since the District delayed the issuance of several change orders. The Commonwealth Court also held the District was properly attributed responsibility for the actions of “third-parties” where the District had control over the hiring and management of those third parties. Specifically, a third-party contractor, whose work disturbed Spearly’s access to the work site, and the Architect’s lack of oversight was ultimately attributable to the District. Finally, the Court concluded that Spearly was not barred from bringing its delay claims by its failure to adhere to the notice procedures for such claims required by the contract. The Commonwealth Court followed the United States Court of Federal Claims’ rationale that a narrow application of notice provisions is not appropriate where the government was aware of the delay. See Hoel-Steffen Construction Co. v. United States, 456 F.2d 760 (Ct. Cl. 1972). In light of this decision, contractors should look closely at the cause of any delay on the public construction project before concluding that a delay claim is barred by a “no damages for delay” clause.