• Federal District Court Holds that Delay Damages are Not Allowed in Breach of Contract Action of Both Parties Contributed to the Delay and There is No Clear Proof of Apportionment.
  • February 11, 2016 | Authors: David S. Coats; John T. Crook; David S. Wisz
  • Law Firm: Bailey & Dixon, L.L.P. - Raleigh Office
  • Claims for “delay damages” frequently arise when a contractor believes that its performance of contractual obligations is delayed for reasons outside the contractor’s control. A common defense to such claims is that the contractor also has some responsibility for the project delays. In the recent case of Flatiron-Lane v. Case Atlantic Company, 2015 U.S. Dist. LEXIS 102539 (M.D.N.C., Aug. 4, 2015), a federal district court considered the impact of such concurrent delays on the contractor’s claim for delay damages.

    In Flatiron-Lane, the plaintiff served as the general contractor for a highway bridge construction project pursuant to a contract with the Department of Transportation. Case Atlantic was a subcontractor involved in the construction of the bridge foundation, in particular the drilled shafts. When the project took longer than expected, Flatiron-Lane and Case became involved in litigation against each other seeking several categories of additional costs and other damages associated with the project. The parties ultimately stipulated to a bench trial, which lasted several weeks. On the issue of delay damages, Flatiron-Lane argued that since the drilled shafts took 44 weeks to complete and the subcontract and project schedule only allocated 22 weeks for that work, it was entitled to recover damages from Case for 22 weeks of extra work. Included within this claim were extra charges for crane rental, the cost of removing excavated material, and the cost of field engineers due to extended period of the drilling. Case disputed both the nature and extent of damages being claimed, and argued that Flatiron was responsible for other delays on the project.

    In considering Flatiron’s claim, the Court initially noted that while delay damages are recoverable under North Carolina law, “the plaintiff must present whatever evidence is available to tie the loss to the period of undue delay attributable to the defendant, and must also demonstrate why better or more certain evidence is not obtainable.” Furthermore, “under the construction law principle of concurrent delay, where two or more parties proximately contribute to the delay of the completion of the project, none of the parties may recover damages from the other delaying parties, unless there is proof of clear apportionment of the delay and expense attributable to each party.” On the facts before it, however, the Court found that each party took an “all or nothing approach” and blamed each other for the entire delay without “giving the court any way to apportion the delay.” Consequently, even though Flatiron had established that Case was in breach of the parties’ subcontract, because the court was “not put . . . in a position to say, with reasonable certainty, what measure of damages [Flatiron] is entitled to recover,” the Court refused to aware Flatiron any delay damages.

    The Court’s decision in Flatiron-Lane is instructive on the nature and extent of the allegations and proof required to establish a claim for delay damages for breach of contract. Even if party seeking such damages is convinced that is has no responsibility for the delay in completion of the construction project, it would appear important to provide the Court with some alternative basis upon which to allocate the delay damages or else a meritorious claim could be defeated solely by evidence from the defending party that each party bears some responsibility (however minor) for the project delay.