- Owner Waives "Time Is of the Essence" Provision of the Contract and Right To Delay Damages Where It Continued To Issue Change Orders and Construction Change Directives After the Substantial Completion Date Had Passed
- March 21, 2006
- Law Firm: Pepper Hamilton LLP - Philadelphia Office
RDP Royal Palm Hotel, L.P. v. Clark Construction Group Nos. 04-16203 and 05-11713, 2006 U.S. App. LEXIS 3815 (11th Cir. Feb. 17, 2006)
RDP Royal Palm Hotel, L.P. v. Clark Construction Group, Nos. 04-16203 and 05-11713, 2006 U.S. App. LEXIS 3815 (11th Cir. Feb. 17, 2006) held that an Owner could not enforce the substantial completion date where the Owner continued to issue change orders and construction change directives after this date had passed. As a result of this waiver, the court further held that the Owner could not hold the Contractor liable for any damages incurred by the Owner as a result of the failure to achieve substantial completion by the substantial completion date.
Clark Construction Group entered into a contract with RDP Royal Palm Hotel, L.P., pursuant to which Clark agreed to construct the Royal Palms Crowne Plaza Resort in Miami Beach, Florida. The deadline for substantial completion of the resort was 518 days from the date of commencement of work. On September 28, 1998, RDP issued formal notice to proceed to Clark, establishing a substantial completion date of February 28, 2000.
Shortly after Clark commenced work, it faced delays and disruptions to its performance in the form of changed conditions and change directives issued by RDP. Clark requested additional compensation and an extension of time as a result of these changes. In response, RDP repeatedly assured Clark that the substantial completion date would be extended appropriately.
Eventually, the substantial completion date of February 28, 2000, passed. However, RDP permitted construction to continue without comment. Indeed, RDP issued hundreds of change orders and construction change directives after February 28, 2000. Clark continued to construct the Resort in accordance with these modifications, and RDP continued to accept the performance.
In March 2002, RDP stopped paying Clark for work completed pursuant to the change orders. Clark ceased work as a result. In response, RDP hired a replacement contractor to complete the Resort. It subsequently sued Clark for breach of contract, seeking, among other things, damages incurred as a result of Clark's failure to achieve substantial completion by the substantial completion date.
The District Court held, and the Appellate Court affirmed, that RDP waived the right to enforce the February 28, 2000 substantial completion date. Both courts reached this conclusion because RDP continued to issue change orders and change directives, and continued to accept Clark's performance of the work, even after the substantial completion date had passed. Because RDP had waived the right to enforce the February 28, 2000 substantial completion date, RDP also waived any right to recover damages incurred as a result of Clark's failure to achieve substantial completion by the substantial completion date.