Although some exceptions exist, No Damages for Delay clauses are generally enforced as long as they are stated in unambiguous terms. However, many state legislatures, such as Missouri’s, have enacted statutes that declare such clauses void and unenforceable in public contracts. But what happens when the prime contractor on a public project places a No Damages for Delay clause in its subcontracts? Can a subcontractor claim the benefit of the statute that invalidates such clauses in the prime contract?
In St. Louis Housing Auth. ex rel. Jamison Elec., LLC v. Hankins Constr. Co., No. 4:12CV1746 CDP, Slip Copy (Dec. 16, 2013), Hankins was a prime contractor on a contract with the St. Louis Housing Authority to modernize a public high-rise building. Hankins subcontracted the electrical work to Jamison. Hankins’ subcontract contained a clause that required Jamison to complete its electrical work in accordance with the terms of the prime contract. It also contained the following clause relating to delays:
Should the Subcontractor be obstructed or delayed in the prosecution or completion of the work by the act, neglect, delay or default of the Contractor . . . then the time herein fixed for the completion of the work shall be extended for a period equivalent to the time lost . . . ; but no such allowance shall be made unless a claim therefor shall be presented in writing to the Contract within forty-eight hours of the occurrence of such delay and such extension of time has been approved by the Owner and the Architect or Engineer.
No payment or compensation of any kind shall be made to Subcontractor for damages because of hinderance or delay in the progress of the work from any [cause].
The project did not proceed as anticipated, and Jamison filed a lawsuit against Hankins and its surety. Jamison alleged that Hankins breached its subcontract by disrupting, delaying and then accelerating Jamison’s work and by withholding payment for work completed. Hankins defended on the grounds that Jamison’s claims were prohibited by the No Damages for Delay clause in the subcontract.
In response, Jamison pointed to Section 34.058 of the Missouri Statutes Revised, which provides:
Any clause in a public works contract that purports to waive, release, or extinguish the rights of a contractor to recover costs or damages, or obtain an equitable adjustment, for delays in performing such contract, if such delay is caused in whole, or in part, by acts or omissions within the control of the contracting public entity or persons acting on behalf thereof, is against public policy and is void and unenforceable.
Section 34.058 further defines a public works contract as “a contract of the state, county, city and other political subdivisions of the state, except the Missouri Transportation Department, for the construction, alteration, repair, or maintenance of any building.”
Hankins and Jamison both agreed that Hankins’ contract with the Housing Authority met the definition of a public contract. However, they disagreed whether Section 34.058 applied to the subcontract. Therefore, the court was confronted with this issue.
This question had not been previously decided by a Missouri court. Therefore, the court set out to derive the intention of the Missouri legislature from the language of the statute. In doing so, the court focused on the definition of “public works contract” contained in the statute and concluded that “this statutory language is clear: under Section 34.058, only certain contracts ‘of’ a governmental entity are public works contracts.” Citing Merriam-Webster’s Collegiate Dictionary 804 (10th ed. 2002), the court noted that “of” is employed in a variety of situations, but most relevantly, it is “used as a function word to indicate belonging or a possessive relationship.” It reasoned that although subcontracts might seem to “belong” to the governmental entity in an indirect or incidental way (i.e., without the public entity, no subcontract would exist), “reading ‘of’ that broadly would stretch the word beyond its commonsense limitations.” It, therefore, concluded that the statute unambiguously excludes contracts between two private parties regardless of whether they are working on a public works project and the clause is enforceable against Jamison. R&B