Whether you are a contractor or subcontractor, no one likes to see the clause in a construction contract commonly known as “No Damage For Delay.” This clause protects a party to the contract – often the owner of the project or a contractor hiring a subcontractor – against damage claims for situations that are their fault.

The No Damage For Delay clause causes trouble for construction companies. The clause allows you an extension to finish your work, but you can't file a lawsuit to make up the money you lost due to days or weeks of delays that weren't under your control. Understanding this contract language when you see it can help you make smarter decisions if project delays start to accumulate.

Venue matters when you want to challenge a No Damage For Delay clause

Many construction contractors and subcontractors have challenged the No Damage For Delay clause in court, with mixed results. Federal and state judges are more likely to strictly interpret New York construction law. These judges also might not consider factors such as imbalances in power between the parties negotiating the contract.

The Subcontractors Trade Association asserts that contractors or subcontractors wanting to challenge a No Damage For Delay clause should consider choosing arbitration to resolve the situation. If your contract provided arbitration as a method of resolving disputes, you can choose an industry professional to decide your case, instead of a retired judge or an attorney. An arbitrator who has worked in construction may more easily understand why delays are so damaging to your company.

Ways to head off a No Damage For Delay contract dispute

The simplest way to avoid a dispute over a No Damage For Delay contract clause is to refuse to sign a contract in which it is inserted. Of course, this isn't always realistic.

If you are bound by a contact with such a clause, carefully document all delays to the project. Be prepared to show in court or in arbitration how the delay for which you're seeking damages was far beyond what you or the owner could have reasonably foreseen or that it constituted active interference by the owner or general contractor. An experienced construction attorney can help you determine if the other party has effectively abandoned or breached your contract by their behavior.

No one enjoys wasting money on a project that's going nowhere, but you do have options when you find yourself in a dispute over a delay that's not your fault.