Contractors Beware - No-Damage-For-Delay Clauses Enforceable in Indiana

By: Brian M. Falcon, Meyer Najem Construction, LLC

            The Indiana Court of Appeals had not addressed head-on the enforceability of a no-damage-for-delay clause (“NDD Clause”) since its decisions in Indiana Dept. of Transp. v. Shelly & Sands, Inc., 756 N.E.2d 1063 (Ind. Ct. App. 2001) and Stelko Elec. Inc. vs. Taylor Cmty, Sch. Bldg. Corp., 826 N.E.2d 152 (Ind. Ct. App. 2005). In those cases, the court enforced the NDD Clauses at issue against contractors seeking damages on public improvements. While both decisions have since been frequently relied upon by owners and general contractors seeking to defeat a claim for delay damages, those decisions were based on projects involving the use and expenditure of public funds. As such, the decisions, while helpful in defense, were usually viewed at least in part through that lens. In late 2023, the Indiana Court of Appeals addressed the NDD Clause once again, this time on a private project between sophisticated parties on a private construction project and reached a similar result.

            In Luse Thermal Technologies, LLC v. Graycor Industrial Contractors, Inc., 221 N.E.3d 701 (Ind. Ct. App. 2023), a subcontractor on an industrial project sought damages of $3,667,275.56 for damages resulting in no small part from project delay. The subcontract included the following variation on a very common NDD clause:

8.8 Delay Claims. The Subcontractor understands and agrees that the potential for its Work being delayed by the conduct of others is inherent in any construction project, including the Project. Accordingly, and other than to the extent the Contractor receives compensation from the Owner or any other entity responsible for such delay, the Contractor shall not be liable to the Subcontractor for any damages whatsoever that may be suffered by the Subcontractor, or for which the Subcontractor may become liable, on account of any acts or omissions on the part of (a) the Contractor or those for whom it is responsible, (b) the Owner, (c) the Design Professional, or (d) any other entity that may arise from or are in any way related to the Project or the Work. The Subcontractor further agrees: (i) any such delay, other than to the extent compensation is otherwise provided in this Subcontract, shall be fully compensated for by an extension of the time to complete performance of the Work and (ii) it shall make no claim due to delay in the performance of Work against those who might have a claim against the Contractor for such damages. (Emphasis added).

Id. at 707.

The subcontractor attempted to avoid the impact of the NDD clause by characterizing the damages not as those flowing from delay but instead due to “acceleration” or “productivity impacts.” Id. at 715-716. Regardless of how the subcontractor tried to describe its damages, the result was the same and was driven by the unambiguous language of the NDD Clause. While subcontractors continue to look for ways to whittle away at a no-damage-for-delay defense, Indiana’s courts seem unwilling and unmoved to relieve an aggrieved subcontractor from the bargain it struck, and the contract terms it agreed to at the outset. Best practice suggests that a sophisticated contractor facing such a provision either (a) attempt to negotiate the terms and remove or lessen the impact of the NDD Clause, or (b) price into its contract sum the risks it is assuming. Otherwise, the contractor is likely to find itself entitled to a time extension only.