Prime contractors and subcontractors are frequently delayed by the failure of utilities to move their lines that interfere with the work in a timely manner. Can you recover for your losses? Sadly, that depends on which state you are working in. In some states the DOT has attempted to avoid liability for such delays by including “No Damage for Delay” clauses in their standard specifications. In other states, the legislature has outlawed such clauses.
Contractors have recovered from the utility itself based on the theory of third-party beneficiary to the contract between the utility and the DOT. Such was the case in Little Rock Wastewater Utility v. Larry Moyer Trucking, Inc.; 321 Ark. 303, 902 S.W.2d 760 (1995).
The Arkansas Highway and Transportation Department (AHTD) awarded a contract to Southern Pavers to widen a road. Moyer Trucking was a subcontractor to Southern Pavers. Prior to entering into the widening contract, AHTD contracted with Little Rock Wastewater Utility to relocate sewer lines. The contract required the utility to relocate its facilities when notified by AHTD. When notified, it was to begin the relocation work within 30 days and complete the work within 150 days thereafter “in a manner as will result in no avoidable interference or delay in the construction work . . .”
Moyer Trucking experienced delays and damages in performing its subcontract work and contended the delays were caused by Utility’s failure to perform its Relocation Agreement with AHTD. Moyer Trucking filed suit against the utility, alleging it was a third-party beneficiary of the Relocation Agreement and it suffered damages as a result of Utility’s failure to perform that agreement satisfactorily. The jury returned a $62,563.49 verdict for Moyer and Utility appealed.
Hold a third-party theory
Utility first argued Moyer Trucking was not legally a third-party beneficiary of the Relocation Agreement between AHTD and Utility. The court disagreed, finding the language “. . . in a manner as will result in no avoidable interference or delay in the construction work . . .” of the Relocation Agreement showed the work was to be practically completed before the earthwork and surfacing contract would be let by AHTD.
Second, Utility argued Moyer Trucking was not an intended beneficiary of the Relocation Agreement because third-party beneficiary status was limited to the prime contractor. The court agreed with the trial court, which held that the parties that did the actual work, including subcontractors, were intended to benefit from the Relocation Agreement.
Next, Utility argued that Moyer Trucking was barred from recovering as a third-party beneficiary by the “no damage” provision in the AHTD standard specifications that apply to the construction contract between Southern Pavers and the department. The AHTD provision specified in part: “. . . no additional monetary compensation will be allowed for any delays, inconveniences, or damages sustained due to any interference from the utilities or appurtenances or from the operations of relocating them.”
The court construed the provision to mean that AHTD was not required to pay any additional monetary compensation to the contractor for delays or damages that resulted from interference by Utility. The provision was only contained in the construction contract between AHTD and Southern Pavers; it was not contained in Utility’s contract. The court also found it was intended for the AHTD’s benefit only and not Utility’s benefit.
So what can contractors and subcontractors learn from this case? First, even if your state DOT has put a “No Damage for Delay” clause in the utility section of their state standard specifications there may be hope for you based on the third-party beneficiary theory. You need to get a copy of the state DOT’s contract with the offending utility. If the wording of that contract makes reference to the construction contract that will potentially give you a good argument to go after the utility. In future columns I will discuss other cases, including ones where the contractors have been unable to recover their losses.
