Construction Law

Delays by a Contractor’s Supplier Do Not Fall Within the Prime Contract's Force Majeure Clause

By John P. Ahlers

During the construction of a tower and fiber optic line, the contractor was delayed by its supplier, causing the contractor to incur an assessment of liquidated damages.  The prime contract force majeure clause defined a force majeure event as: "Any reasonable delay which is due exclusively to causes beyond the control and without the fault of contractor . . ." (emphasis added).  According to the general contractor, it was entitled to a time extension because its supplier delayed the project.  The delay of the supplier was "beyond the control and without the fault of" the contractor.

The court held as a matter of law that the delay of a subcontractor was not a force majeure event, reasoning that a prime contractor could excuse itself from responsibility for delay simply by subcontracting the work out.  The court reasoned this interpretation would give a perverse incentive to contractors to outsource work and supplies, and would undermine an owner's reasonable entitlement to legal remedies (owners normally do not have third party beneficiary rights against subcontractors and suppliers).  On the other hand, if the general contractor remains liable for its suppliers' delays, the general contractor can transfer that liability to the supplier with whom it is in privity.  The general contractor is the party in the best position to avoid supplier delays by paying the supplier a higher price in obtaining a delay damages clause in its subcontracts.  The court held while the general contractor was not at fault in its choice of supplier, the general contractor is nevertheless responsible to the Owner for the supplier's delays when those delays are not themselves excused by a force majeure event.

Hutton Contracting Co., Inc. v. City of Coffeyville, 487 F.3d 772 (10^th Circ. 2007)

Full post as published by Construction Law Blog on February 26, 2008 (boomark / email).