Jun 6 2013

Under What Circumstances is the Owner Entitled to Delay Damages

 

Edward B. Keidan, ©2013

In the case of Ponziano Construction Services Inc. v. Quadri Enterprises, LLC, 980 N.E.2d 867, (Ind. Ct. App. 2012), the Court concluded that delays caused by the owner of the construction project prevented setoff of amounts owed to the contractor.

The project was the construction of a medical office on the site of a pre-existing structure in Crown Point, Indiana. At the conclusion of the project, the contractor filed suit for mechanics lien foreclosure, seeking an undisputed contract balance of $51,587.

The owner sought to reduce the amount owed by claiming damages against the contractor because of delays in construction. The owner claimed the delays did not allow her to open her medical practice at that location for several months beyond the contemplated opening date, costing the practice significant money. After setoff to the owner, the trial court awarded contractor only a net $16,000. The contractor appealed.

The Contract did not specify a date certain for completion of the building. The Court stated that where the parties do not agree on a time for performance, the law implies a "reasonable" time. The determination of what constitutes a reasonable time is a fact-specific inquiry, dependent on the type of contract, the circumstances surrounding the performance of the contract and the situation of the parties.

A party cannot impede performance of the contract

In discussing the delays on the project, the Court stated Indiana law: "However, a party cannot impede performance of the contract and then claim damages due to delay of performance."  980 N.E.2d at 874 (citation omitted). In applying this statement of law, the Court noted that the owner: (a) moved into the office twenty days before the occupancy permit was issued and before construction was finished; (b) caused a two week delay by untimely submitting a new blueprint to the State of Indiana after changing the building plans; (c) caused a two week delay by failing to file a landscape design with the City of Crown Point; and (d) caused a one week delay by changing the size of certain windows.

Under these circumstances, the Court concluded that "a substantial portion" of the delay was "self-imposed" by the owner.  980 N.E.2d at 875.  For this reason, the Court held that it was not appropriate to allow a setoff for any delay, against the money owed by the owner to the contractor.

The opinion, while concluding that "a substantial portion" of the delay was caused by the owner, did not indicate what delays, if any, were caused by the contractor. And it is not clear whether there was any expert testimony regarding schedule or delay analysis. The result may be different where the contract contains a completion date, where the contract contains a provision assigning ownership of 'float,' and where there are multiple delays caused by both parties and expert testimony regarding the cause and duration of those delays.