Attorney's Column
Lawsuit Based on Delay Claim Can Proceed Despite Contract Language, Court Rules
By THOMAS H. WELBY, P.E., ESQ., and GREGORY J. SPAUN, ESQ.
As most of you undoubtedly know, “No Damages for Delay” clauses are commonplace in construction contracts. However, prior to 1986, New York courts often did not enforce such clauses, holding “uncontemplated delays” as being compensable. With the decision of the New York Court of Appeals in the case of Corinno Civetta Construction Corp v the City of New York, courts began enforcing “No Damages for Delay” clauses with a vengeance. Yet in the Civetta decision, the court set forth four very limited circumstances under which a contractor may still recover delay damages notwithstanding the presence of such a clause. (This column usually discusses these exceptions in the context of whether a seemingly lengthy delay was within the contemplation of the parties at the time of contract.)
Recently, in the case of Nagori Contracting Corp. v City of New York, a court reminds us that these same circumstances can also support recovery where the contract provides for the recovery of damages for some (but not all) causes of delay, and that the possibility of recovering often turns on the facts of the case.
Background
In late 2019, Nagori Contracting Corp. submitted a bid for a project to construct a composting facility for the New York City Department of Sanitation. In December 2019, this bid was accepted and the contract was awarded. The project term was to have been 485 days (16 months) from the issuance of a Notice to Proceed. The pandemic struck shortly after, and three months after the award of the contract, Executive Order 202 was issued, shutting down all non-essential activities. (You may recall that public construction was considered an essential activity which was permitted to proceed.)
The Notice to Proceed was ultimately issued by the City in March of the following year, with a proceed date of April 19, 2021. The project was completed in 2023, and Nagori was paid the full adjusted contract sum of $17.2 million. However, Nagori incurred over $1.5 million in increased costs for labor, materials and insurance attributable to the delay in issuing the Notice to Proceed, and it placed a claim with the city to recover those costs. The city denied the claim, arguing that the delay did not meet the criteria for compensation under Section 11.4 of the Standard Construction Contract. Nagori then commenced a lawsuit to recover those damages. The city ultimately moved for summary judgment dismissing the lawsuit accordingly.
Decision
The court denied the city’s motion. In doing so, the court addressed the city’s contention about the delay damages provision in the contract, finding that it was questionable as to whether it applied to delays incurred only after the issuance of the Notice to Proceed, as was argued by the city, or whether such damages could be awarded for any time after the contract was awarded. However, the court did not delve deeper on the contractual issue because it found an issue of fact as to whether two of the four common law exceptions to a No Damages for Delay clause (which, by way of reminder, are for: (1) delays caused by the contractee’s bad faith or its willful, malicious, or grossly negligent conduct; (2) uncontemplated delays; (3) delays so unreasonable that they constitute an intentional abandonment of the contract by the contractee; and (4) delays resulting from the contractee’s breach of a fundamental obligation of the contract) could be applied. Specifically, the court held that the issuance of a Notice to Proceed was a fundamental obligation of the contract, and found that there were questions of fact as to whether the city’s delay in issuing the Notice constituted a breach of that fundamental obligation. The court also found that there were issues of fact as to whether a 15-month delay in issuing a Notice to Proceed on a 16-month project was contemplated by the parties at the time of the contract. Accordingly, the court directed the parties to proceed to trial.
Comment
The court here made it clear that although the contractual provisions would be applied, there are certain principles of common law which will be grafted into all contracts—here, the common law exceptions to a No Damages for Delay clause. While the issue of whether Nagori is entitled to compensation for the delay under its contract will be litigated, the court gave Nagori two other lifelines in the event that its contractual claim is ultimately unsuccessful at trial. Accordingly, even if the contract claim fails, Nagori may yet recover if it proves either that the city breached a fundamental obligation of the contract in delaying the issuance of the Notice to Proceed, or that the 15-month delay in issuing a Notice to Proceed on a 16-month project was not contemplated by the parties at the time of the contract.
As we mentioned in last month’s column, contract law and contract interpretations are not always simply plain reading and common sense. Further, there may be remedies available outside of the contract, including those granted by statute, regulation, or case law. Accordingly, if you face an event of delay that is seemingly outside of the compensation provisions of the contract (including a blanket No Damages for Delay clause), you should reach out to experienced construction counsel so that you can determine all of your options before proceeding.
About the authors: Thomas H. Welby, Esq., P.E., is General Counsel to the CIC and the BCA, and is a co-founder and Senior Counsel of Welby, Brady & Greenblatt, LLP. Gregory J. Spaun, Esq., is General Counsel to the Queens and Bronx Building Association and a partner with the firm.
Published: November 17, 2025.