Implied Warranty That Neither Party to a Contract Will Do Anything to Prevent, Hinder, or Delay the Other Party’s Performance

Although rarely stated as such in the contract documents, the owner does have a broad series of contractual responsibilities. The owner’s failure to adequately execute these responsibilities can produce a recoverable claim.

This is the second blog post in a series on implied warranties in construction contracts. The first post discusses the implied warranty that plans and specifications are sufficient and adequate for the purpose intended. The second post discusses the implied warranty that neither party to a contract will do anything to prevent, hinder, or delay performance thereof by the other party. The third post discusses the implied warranty that, on multi-prime projects, the owner or construction manager will coordinate the activities of the respective contractors to avoid disruptions.

Of paramount importance is the universally recognized rule that a contractor is entitled to a reasonable opportunity to perform its contract without obstruction or interference from the owner.¹ In fact, it has been held that the owner has the obligation to do everything reasonably necessary to facilitate the work and to refrain from doing anything that will delay or disrupt the contractor’s operations. The one rule that the courts of virtually every jurisdiction, federal as well as state, seem to generally apply is that an owner that actively interferes with the contractor’s performance of the work will be liable for the resulting damage despite any broadly drawn exculpatory clauses that may have found their way into the contract.

The Gasparini² case illustrates an owner’s active interference with a contractor’s performance of the contract work. There, the contractor had agreed to construct a portion of the Pennsylvania Turnpike pursuant to an agreement requiring that embankment work would follow a separate slushing operation that another contractor was to perform and that the contractor waived any claim for delay damages or extra costs arising from the slushing operations. The contractor was ordered to proceed on June 6, 1965, and mobilized its forces and equipment on that date. However, the slushing operation delayed commencement of the contract work until November 30, 1965. The court found that the Turnpike Commission was fully aware that the slushing operation would burden the project site for a considerable time when it ordered the contractor to proceed, and ruled that under those circumstances, the Commission had affirmatively interfered with the contract work. The court further found that the Commission’s interference involved an essential matter that was not contemplated by the contract and held that the Commission was responsible for the additional costs and expenses resulting from delay.³

The holding in Gasparini has been extended to situations where an owner, with knowledge that utility or right of way interference will occur, orders a contractor to proceed without taking appropriate steps to expedite the removal of such interferences. In a New York case,⁴ the State redesigned a substantial portion of the job after work had begun, took many months to provide the contractor with the necessary redesigns, furnished defective plans and specifications to the contractor, and failed to give the contractor access to various portions of the construction site. The court held each of these actions on the State’s part to be the type of active interference that would support the award of damages to the contractor.

The Luria Brothers & Company⁵ and J.T. Hedin Constr. Co.⁶ cases exemplify the types of delay and impact damages that may be recovered for owner interferences. In Hedin, the plaintiff had agreed to construct a hospital facility for the Veterans Administration. However, because of faulty design, there were numerous changes and redesigns of the specifications pertaining to piles, spread footings, and a sewer. It was found that these changes and redesigns severely disrupted and delayed the plaintiff’s work. Moreover, the court determined that the total cost method was the appropriate method for computing the additional costs resulting from the government’s interferences. In making this determination, the court reasoned as follows:

The exact amount of additional work which plaintiff had to perform as a result of the foundation problem is difficult, if not impossible, to determine because of the nature of the corrective work which was being performed. The adverse weather conditions during the extended period in which the excavations remained open caused a myriad of problems. Additional trenching, form construction, and pumping of surface water became necessary. Re-excavation by hand was sometimes required. The extreme muddy conditions caused difficulties and slowed down performance. There is no precise formula by which these additional costs can be computed and segregated from those costs which plaintiff would have incurred if there had been no government-caused difficulties. However, the reasonableness and accuracy of plaintiff’s estimate, which was prepared by an experienced engineer, whose qualifications have been unchallenged, have been established. Defense counsel stated that the estimate was not challenged. The closeness of the bids gives support to the reasonableness of the estimate. The bidders were three extremely experienced contractors of large construction projects. Plaintiff on prior occasions had successfully constructed a number of large projects for the Veterans Administration. Plaintiff has established the fact that it performed additional work. Moreover, the responsibility of defendant for these damages is clear. The only possible method by which these damages can be computed is by resort to the “total cost” method. Under such circumstances, as stated earlier, we think that the government should not be absolved of liability for damages which it caused, because the precise amount of added costs cannot be determined.⁷

It is significant, however, that the recovery allowed by the court included only those items of work that the government interferences affected. The court also allowed the plaintiff to recover the additional expenses for delays resulting from material shortages, abnormal weather, and strikes, which the court determined the plaintiff would not have encountered but for the original government-caused delays. These additional expenses included the maintenance of a temporary road, providing temporary heating and snow removal, the costs to take over subcontractor work, escalated wages, and home office overhead.

Luria involved a contract to construct an aircraft facility. Because of design errors, the government had made numerous revisions to the foundation plan for the facility. The court found that these redesigns and the dilatory fashion in which they were made delayed and interrupted the plaintiff’s work. The plaintiff’s damages were computed as follows: The court first allocated the delay days attributable to the government interference, determining that the government was responsible for 81% of the delays, and then apportioned the overrun period costs for equipment, field supervision, winter protection, rehandling materials, maintaining excavations, and wage and material price increases. The court also awarded the plaintiff an amount for home office overhead expenses, which was derived by allocating a portion of the total home office overhead expenses to the project and then prorating that amount over the delay period on a per diem basis. In addition, the plaintiff was allowed to recover for the loss of productivity of its labor force. The proof for this item of damage consisted of the expert testimony of a former employee that labor productivity was reduced by 33% in winter weather. The court, however, credited the plaintiff with a loss of 20% of the labor costs incurred during the winter months.

The items of damages awarded in Luria and Hedin illustrate the types of delay and impact losses sustained by contractors. Two other items of possible damage, loss of unreimbursed fixed overhead and loss of plant efficiency, were considered in two New York cases. In Felhaber,⁸ a contractor was allowed to recover for the unreimbursed fixed overhead incurred in the performance of a contract for foundation work. The original contract had a completion date of September 1, 1968. However, because of State interferences, only 41% of the contract work was performed by that date, and shortly thereafter, the contract was terminated pursuant to a separate modification agreement. The court held that since the plaintiff had assembled enough equipment to complete the job during the contract period but was able to perform only a portion of the contract work, it had sustained a loss of fixed costs and overhead.

The following actions also illustrate the type of active interference that amounts to a breach of contract on the owner’s part and that will form the basis for the contractor’s recovery of damages:

• Failure to expeditiously negotiate removal of an interfering water main.⁹

• Failure to advise bidders that a site will not be available until after the relocation of coaxial conduit.¹⁰

• Failure to timely furnish access to a portion of a work site.¹¹

• Failure to acquire necessary rights of way and easements.¹²

¹    L. L. Hall Construction Company v. United States, 379 F.2d 559, 564 (Ct. Cl. 1966). Gasparini Excavating Company v. Pennsylvania Turnpike Commission, 187 A. 2d 157 162 (Pa. 1963). Felhaber Corporation v. New York, 410 N.Y.S. 2d 920, 924, 927 (App. Div. 1978); J.A. Jones Constr. Co. v. City of Dover, 372 A.2d 540 (Del. Super. Ct.) aff’d, 377 A.2d 1 (1977).

²    Gasparini Excavating Company v. Pennsylvania Turnpike Commission, 187 A. 2d 157 162 (Pa. 1963).

³    Id. at 162.

⁴    Slattery Contracting Co. v. State, 288 N.Y.S.2d 126 (Ct. Cl. 1961).

⁵    Luria Bros. & Co. v. United States, 177 Ct. Cl. 676, 369 F.2d 701,707, 713 (1966).

⁶    J. D. Hedin Constr. Co. v. United States, 347 F.2d 235, 258, 171 Ct. Cl. 70 (1965).

⁷    Id. at 247.

⁸    Felhaber Corporation v. New York, 410 N.Y.S. 2d 920, 924, 927 (App. Div. 1978).

⁹    Pennsylvania v. General Asphalt Paving Company, 405 A.2d 1138 (Pa. Commonwealth Ct. 1979).

¹⁰    Pennsylvania v. S. J. Groves and Sons Company, 343 A.2d 72 (Pa. Commonwealth Ct. 1975).

¹¹    Franklin Contracting Company v. New Jersey, 365 A.2d 952 (N.J. Super. Ct. 1976).

¹²    Ace Stone, Inc. v. Wayne Township, 221 A.2d 515 (N.J. 1966).

ADDITIONAL RESOURCES

Blog

Discover industry insights on construction disputes and claims, project management, risk analysis, and more.

MORE

Articles

Articles by our engineering and construction claims experts cover topics ranging from acceleration to why claims occur.

MORE

Publications

We are committed to sharing industry knowledge through publication of our books and presentations.

MORE