What is a Justifiable Excuse for a Construction Delay?

When a construction delay occurs, a contractor may try to avoid liability for any damages by claiming that the delay was unavoidable or caused by outside factors. While there are certainly cases where a contractor could not have avoided an event that caused a delay, steps should also be taken to minimize the impact of the delay, or to continue moving forward on parts of the project that are unaffected by the unforeseen circumstances.

If a contractor fails to mitigate the effect of the delaying event, he may find himself liable for substantial damages, as in the case of Richard E. Lambert, Ltd. v. City of Tucson Dep’t of Procurement, 223 Ariz. 184, 221 P.3d 375, ( App. 2009).

Which Party Bears the Cost of an Unforeseeable Delay?

In Lambert, the City of Tucson (“the City”) contracted with Richard E. Lambert, Ltd. (“REL”) to improve a city-owned neighborhood center. The contract required REL to complete the project by February 3, 2005. Another provision required that, in the case of a delay, REL should expeditiously proceed with the portions of the work that were unaffected by the delay. REL completed the project on December 19, 2005, 319 days after the agreed upon completion date.

The City assessed liquidated damages of $500 per day for the delay and refused to pay the final $108,305.95 due on the project. REL appealed that decision to the City Contract Officer, and then the Direct of Procurement, but both officials upheld the liquidated damages assessment.

REL filed a special action in superior court, were the assessment was challenged based on a contract provision that provided that REL would receive an extension for delays from “unforeseeable causes beyond the control and without the fault of negligence of the Contractor”. The Court granted REL’s motion for summary judgement, finding that the Procurement Director’s findings were unsupported by the facts. The City appealed to the Arizona Court of Appeals.

The Court noted that REL had the burden of showing that the excusable event caused a delay in the overall completion of the project. The fact that one portion of the project was delayed was not an excuse for delaying other parts of the project.

In this case, a fire, problems involved with relocating a valley gutter used in the contract, and a delay in establishing permanent power at the construction site all resulted in construction delays. However, the court examined each of these events and determined that they were not justifiable excuses for delaying the overall project.

The fire occurred two months after the agreed upon completion date, and REL was already six months behind on the project. After the fire, REL had a duty to work on other portions of the project that were not impacted by the fire, but failed to do so. Similarly, the Court found that the valley gutter relocation did not impact portions of the project that were holding up REL’s progress, showing that the overall project completion was not caused by excusable events, but rather by REL’s own failures.The Court reinstated the Procure Director’s decision and the liquidated damages for the City.

If a construction delay is caused by an excusable event, contractors should still be expeditious in completing unaffected portions of the project, or risk being held responsible for the delay.

Chernoff Law handles real estate litigation matters throughout Arizona. Contact us by calling 480-719-7307 to discuss your real estate matters.