DELAY DAMAGES AND

SITE CONDITIONS:
CONTRASTS IN US AND ENGLISH LAW

A paper based on a joint seminar of the American Bar

Association and the Society of Construction Law
held in London on 3rd March 2015

Stephen A Hess and Julian Bailey

September 2015
D181

www.scl.org.uk
 DELAY DAMAGES AND SITE CONDITIONS:
CONTRASTS IN US AND ENGLISH LAW

Stephen A Hess and Julian Bailey

1 Introduction
Abraham Lincoln was once asked by an aspiring lawyer – John Brockman –
how he should go about learning the law. Lincoln’s short reply was as
follows:
‘Dear Sir,
Yours of the 24th asking ‘the best mode of obtaining a thorough
knowledge of the law’ is received. The mode is very simple, though
laborious, and tedious. It is only to get the books, and read, and study
them carefully. Begin with Blackstone’s Commentaries, and after
reading it carefully through, say twice, take up Chitty’s Pleading,
Greenleaf’s Evidence, & Story’s Equity &c in succession. Work, work,
work, is the main thing.
Yours very truly,
A Lincoln.’1

The headline message – to ‘work, work, work’ – bears just as much relevance
today as it did in antebellum America. But what is also noticeable, and
perhaps even surprising to our modern modes, is Lincoln’s reference to leading
English treatises as sources of law and learning for American lawyers.

Sir William Blackstone’s Commentaries on the Laws of England had been in

publication for almost a century. And no doubt a comprehensive work on
English law would be essential to every pre-revolutionary American lawyer,
but its relevance could perhaps be expected to diminish significantly in the
intervening years following independence. Moreover, Joseph Chitty’s Treatise
on Pleading – first published in England in 1808 – had not only travelled from
old England to its former North American colonies, but it had taken hold as an
essential guide to every litigious lawyer.

What is evidenced in Lincoln’s short missive is the enduring bond between

English law and the laws of the United States. The thought this provokes is:
how close or divergent are the paths which the law has taken in both nations in
subsequent decades?

The task of comparing English and American laws would be a profitable if

exhausting one, though one in which an American lawyer would find much
that he recognises in English law, and vice versa. Our task, however, is not to

1 Letter to John M Brockman, 25th September 1860, in Basler (editor), The Collected
Works of Abraham Lincoln (Rutgers University Press, 1953), Volume 4.

1
highlight areas of American and English construction law on which there is
commonality, but to do the very opposite. In this paper we seek to address two
aspects of construction law in the United States and England where
divergences have developed.

The first concerns ‘no damage for delay’ clauses (also called, as in the rest of
this paper, ‘no-damages-for-delay’ clauses). These are well known to
American construction lawyers, but are unheard of in English contracts. Given
their potentially serious consequences, issues concerning the enforceability of
such clauses have arisen in the United States. We consider those
enforceability issues, also how they might be approached from an English
perspective.

The second arises out of a frequent issue in construction and engineering

projects. If a contractor enters into a contract to build a structure according to
the design prepared on behalf of the employer, is the contractor entitled to
relief or compensation, should the design contain errors that result from
inadequate consideration having been given to site conditions, or when
subsurface conditions differ from those anticipated by the contractor? As we
shall see, the answers to this question given under US and English law are
different.

2 ‘No-damages-for-delay’ clauses: the USA

Is there a single American position?

It is an interesting endeavour to try to characterise ‘American law’ concerning

a particular subject, because the phrase is inherently misleading. Contract law
is formulated in fifty-one different jurisdictions – the fifty States plus the
Federal Government; but some topics, such as the treatment of differing site
conditions, find felicitous harmony among those jurisdictions. On the other
hand, the treatment of ‘no-damages-for-delay’ clauses provides ample
opportunity for the comparative law scholar to experience American common
law with its most vivid internal contrasts. As we shall see, American courts do
not agree at all on the details of the enforceability of ‘no-damages-for-delay’
clauses. Indeed, the American Bar Association found so much variation in the
treatment of ‘no-damages-for-delay’ clauses that it was impelled to
commission a hefty treatise on that subject alone.2

Nonetheless, the broad study of ‘no-damages-for-delay’ clauses is a profitable

undertaking, in order to compare such clauses with the manner in which
English law treats delay damages. As presaged by the introduction, we begin
our review with a common point in English and American law: limitations on
damages in the absence of express contractual provisions. We then review the
general enforceability of contractual limitations on delay damages, and
identify some chief points of contention among American courts.

2 Richard G Lowe, Fifty-State Monograph on the Enforceability of ‘No Damages for Delay
Clauses’: A Report of the Subcommittee on Survey of State Laws for the Construction
Industry (American Bar Association, 1998). This investigation ran to some 371 pages.

2
The starting-point: without a ‘no-damages-for-delay’ clause
The obvious contrast to a rule under which a party cannot recover damages
occasioned by delays attributed to the other party’s conduct is a rule under
which such damages are recoverable. But precisely what damages? The
inference that all damages caused by such delays are fair game for the litigant
is too broad, and has been so since the middle of the nineteenth century.

In Hadley v Baxendale in 1854, a case that has launched as many judicial

opinions as Helen of Troy’s face launched ships,3 Baron Alderson wrote:
‘Now we think the proper rule in such a case as the present is this:-
Where two parties have made a contract which one of them has broken,
the damages which the other party ought to receive in respect of such
breach of contract should be such as may fairly and reasonably be
considered either arising naturally, ie according to the usual course of
things, from such breach of contract itself, or such as may reasonably be
supposed to have been in the contemplation of both parties, at the time
they made the contract, as the probable result of the breach of it. Now, if
the special circumstances under which the contract was actually made
were communicated by the plaintiffs to the defendants and thus known
to both parties, the damages resulting from the breach of such a contract,
which they would reasonably contemplate, would be the amount of
injury which would ordinarily follow from a breach of contract under
these special circumstances so known and communicated. But, on the
other hand, if these special circumstances were wholly unknown to the
party breaking the contract, he, at the most, could only be supposed to
have had in his contemplation the amount of injury which would arise
generally, and in the great multitude of cases not affected by any special
circumstances, from such a breach of contract. For, had the special
circumstances been known, the parties might have specially provided for
the breach of contract by special terms as to the damages in that case;
and of this advantage it would be very unjust to deprive them …’4

The rule in Hadley v Baxendale thus serves to limit damages that may be
awarded for breach of contract: only those losses which were (a) within the
reasonable contemplation of the parties; or (b) unusual consequences
communicated at the outset of the contract. And for purposes of our
discussion of both delay damages and differing site conditions, it is perhaps the
last sentence of the quotation above that is the most important and most
enigmatic: parties have the right to fashion their commercial relationships as
they wish. That right encompasses the right to allocate risks and
responsibilities consciously and not in a manner that the court supposes they
might have if (contrary to fact) the special circumstances had actually been
contemplated by the parties.

3 With apologies to Christopher Marlowe.

4 Hadley v Baxendale, 9 Ex 341, page 349; also 156 ER 145 (1854).

3
A ‘no-damages-for-delay’ clause
In the context of delay damages, two salient facts may be observed concerning
Hadley v Baxendale’s limits.5 First, application of the rule is notoriously
difficult to predict in advance – perfectly reasonable business persons and
jurists can have dramatically different views as to what constitute the
proximate results of a breach of contract. Second, the magnitude of
‘foreseeable’ damages can be quite extensive in comparison to the scope of the
initial undertaking. In order to avoid a crippling damages award arising from
delays in performance, many owners include in their contracts a ‘no-damages-
for-delay’ clause. For any delay occasioned by the owner’s (employer’s)
conduct, this limits the contractor’s recourse to an extension of time.6 A
typical clause reads:
The Owner shall not be liable to the Contractor and/or any Subcontractor
for claims or damages of any nature caused by or arising out of delays.
The sole remedy against the Owner for delays shall be the allowance of
additional time for completion of the Work, the amount of which shall
be subject to the claims procedure set forth in the General Conditions.

The simplicity and breadth of this exculpatory language make the limitation
quoted substantial indeed: the prohibition against ‘claims or damages of any
nature caused by or arising out of delays’ appears limitless in the protection it
affords owners from the most predictable of financial consequences of even
egregious misconduct. And therein lies the rub: whatever proper purpose a
‘no-damages-for-delay’ clause may serve, its typical structure admits of
bountiful opportunity for abuse or injustice.

Exceptions to ‘no-damages-for-delay’ clauses

In what circumstances might abuse or injustice appear? A convenient way to

investigate these is to review the multiple exceptions that courts have carved
out to limit enforceability of ‘no-damages-for-delay’ clauses. In that way, we
can learn of the underlying concerns that judges have with such clauses, and
also learn why courts uniformly find some applications that would be too
unjust to enforce.

We begin by observing that a handful of jurisdictions have actually struck out

the use of ‘no-damages-for-delay’ clauses as against public policy. These
rejections have come through legislative action, however, not through judicial
activism. By way of example, Colorado law includes the following statute:
‘(1)(a) Any clause in a public works contract that purports to waive,
release, or extinguish the rights of a contractor to recover costs or
damages, or obtain an equitable adjustment, for delays in performing
such contract, if such delay is caused in whole, or in part, by acts or
omissions within the control of the contracting public entity or persons

5 Hadley v Baxendale: note 4.

6 These clauses are imposed in many contractor-subcontractor agreements as well, but for
purposes of this discussion we will assume that the contract is between an owner
(employer) and a contractor.

4
 acting on behalf thereof, is against public policy and is void and
unenforceable.’7

This statute applies only to ‘public works’ contracts, however, which are
defined as construction contracts of the state and its political subdivisions. The
absence of application to private contracts is conspicuous.

Barring legislative action, the rule in most states is that ‘no-damages-for-delay’

provisions are valid and enforceable, so long as they meet ordinary rules
governing the validity of contracts.8 The general statement of that principle,
unfortunately, is where our ability to state a ‘black letter’ rule ends and
variations among jurisdictions begin. By way of example, compare the
following three statements of the rule from different jurisdictions. First, the
Supreme Court of South Carolina:
‘Among the recognized exceptions are (a) delay caused by fraud,
misrepresentation, or other bad faith; (b) delay caused by active
interference; (c) delay which has extended such an unreasonable length
of time that the party delayed would have been justified in abandoning
the contract; (d) delay that was not contemplated by the parties; and (e)
delay caused by gross negligence.’9

The Texas Supreme Court has articulated the following statement of the rule,
followed in turn by several other courts:
‘Texas recognizes four exceptions to the enforcement of ‘no damages for
delay’ clauses. These are when the delay: (1) was not intended or
contemplated by the parties to be within the purview of the provision; (2)
resulted from fraud, misrepresentation, or other bad faith on the part of
one seeking the benefit of the provision; (3) has extended for such an
unreasonable length of time that the party delayed would have been
justified in abandoning the contract; or (4) is not within the specifically
enumerated delays to which the clause applies.’10

The last example comes from the highest New York court, its Court of
Appeals:
‘Generally, even with such a [‘no-damages-for-delay’] clause, damages
may be recovered 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.’11

7 CRSA §24-91-103.5.
8 United States for Use and Benefit of Williams Electricity Company, Inc v Metric
Constructors Inc, 325 SC 129, pages 132-133, 480 SE.2d 447, page 448 (1997).
9 Williams Electricity v Metric Constructors: note 8.
10 Green International Inc v Solis, 951 SW.2d 384, page 387 (Tex 1997), followed by
Tupelo Redevelopment Agency v Gray Corporation Inc 972 So.2d 495, 512 (Miss 2007).
11 Corinno Civetta Constructors Corporation v City of New York, 67 N.Y.2d 297, page 309;
493 N.E.2d 905, page 910; 502 N.Y.S.2d 681, page 686 (1986).

5
There are similarities among the exceptions, to be sure, but there are also
differences that lurk beneath the surface.

Delays not intended or contemplated as within the clause

The different treatment accorded to proposed exceptions to the enforceability

of ‘no-damages-for-delay’ clauses stands in full relief with respect to the
application of such clauses to delays as were ‘not within the intention or
contemplation of the parties’ at the time they contracted. Interestingly, the two
opposing camps invoke exactly the same principle – freedom of contract – in
justifying their adoption or rejection of the proposed exception.
‘It has been settled for some time that exculpatory clauses will not bar
claims resulting from delays caused by the contractee if the delays or
their causes were not within the contemplation of the parties at the time
they entered into the contract. The exception is based on the concept of
mutual assent. Having agreed to the exculpatory clause when he entered
into the contract, it is presumed that the contractor intended to be bound
by its terms. It can hardly be presumed, however, that the contractor
bargained away his right to bring a claim for damages resulting from
delays which the parties did not contemplate at the time. Thus, even
broadly worded exculpatory clauses, such as the one at issue in these
actions, are generally held to encompass only those delays which are
reasonably foreseeable, arise from the contractor’s work during
performance, or which are mentioned in the contract.’12

The careful reader will note something vaguely familiar in the language quoted
above from a New York Court of Appeals opinion: it seems to invoke the very
considerations that Baron Alderson reviewed in Hadley v Baxendale,13 but
with a very different objective:
‘The ‘contemplation of the parties’ exception is particularly interesting
as it harkens back to the rule in Hadley v Baxendale. It is somewhat
ironic that a rule most often employed to limit recovery of consequential
damages is employed to nullify the operation of a clause whose purpose
is to limit, among other things, the recovery of consequential damages.’14

In fairness to the New York court, it should be noted that Hadley v Baxendale
addressed limitations to the predictable consequences of a breach of contract,
while the New York Court of Appeals was addressing the predictable delays
that might constitute a breach of contract. Whether the difference is material
would be a profitable discussion in its own right, but for purposes of this paper
we merely observe that it is a question whose answer depends on which
jurisdiction is answering the question.

Thus, for example, if we were in Wisconsin, we would get the following

explanation for rejection of the proposed exception:

12 Corinno Civetta, note 11, pages 309-310.

13 Hadley v Baxendale: note 4.
14 Philip L Bruner & Patrick J O’Connor Jr, Bruner & O’Connor on Construction Law
(2014), §19:56 fn 3.

6
 ‘… we hold that delay ‘not contemplated by the parties’ is not an
exception to the general rule that ‘no damage for delay’ clauses are
enforceable. We conclude that parties can mutually assent to such a
clause without contemplating in particularity all of the potential causes
of delay. Indeed, the adoption of a ‘no damage for delay’ clause shows
that the parties realize that some delays cannot be contemplated at the
time of the drafting of the contract. The parties include the clause in the
contract in order to resolve problems conclusively should such delays
occur. The parties can deal with delays they contemplate by adjusting
the start and completion dates or by including particular provisions in the
contract. ‘[I]t is the unforeseen events which occasion the broad
language of the clause since foreseeable ones could be readily provided
for by specific language.’ City of Houston v RF Ball Construction Co,
Inc, 570 S.W.2d 75, 78 (Tex.Civ.App.1978). Thus, the doctrine of
mutual assent supports our conclusion that delays not contemplated by
the parties should not be an exception to the rule that ‘no damage for
delay’ clauses should be enforced.’15

It is interesting that both courts quoted above rely on the fundamental nature of
mutual assent to derive conflicting decisions. In general, it appears that the
preponderance of courts considering the question have rejected the New York
approach.16 In fact, even in New York, courts have avoided invocation of the
nominal exception by finding as a matter of fact that particular delays were
actually within the contemplation of the parties at the time they contracted.17

Interference by the owner

A second proposed exception that has received somewhat uneven treatment is

improper interference by the owner. The dispute is not so much as to whether
an owner can interfere with impunity, but rather what level of misconduct will
constitute ‘interference’ sufficient to withhold enforcement of a ‘no-damages-
for-delay’ clause. At one extreme, Illinois has overtly rejected the ‘active
interference’ exception, but does allow a contractor to avoid enforcement of
the clause by proving ‘intentional interference’. 18

The conceptual basis for recognizing an exception for active interference was
set out in a recent Texas Supreme Court decision:
‘Based on their years of experience, education, and training,
[contractors] can assess potential delaying events when estimating and
bidding public works. For example, they can make a judgment on the
quality and completeness of the plans and specifications, determine

15 John E Gregory & Son, Inc v A Guenther & Sons Co, Inc, 147 Wis.2d 298, pages 305-
306; 432 N.W.2d 584, 587 (1988) (footnote omitted).
16 Law Company, Inc v Mohawk Const and Supply Company, Inc, 702 F.Supp.2d 1304,
page 1323 (D Kan 2010): ‘The decisions rejecting the uncontemplated delay exception
appear to be both the better-reasoned approach and the modern trend among the cases’.
17 Bovis Lend Lease (LMB), Inc v Lower Manhattan Development Corporation, 108 A.D.3d
135, page 147, 966 N.Y.S.2d 51, 60 (App Div 2013) (the parties understood that the
performance of the contract might be hindered by regulatory delays).
18 Asset Recovery Constructors, LLC v Walsh Constructors Company of Illinois, 980
N.E.2d 708, page 729, 366 Ill.Dec 615, page 636 (2012).

7
 potential delays resulting from material shortages, analyze historical
weather data for potential delays, and assess possible delays from soil
conditions by studying soil testing reports furnished by most owners.
However, they cannot assess potential delays that may arise due to an
owner’s direct interference, willful acts, negligence, bad faith fraudulent
acts, and/or omissions. Generally, a contractual provision ‘exempting a
party from tort liability for harm caused intentionally or recklessly is
unenforceable on grounds of public policy.’ We think the same may be
said of contract liability. To conclude otherwise would incentivize
wrongful conduct and damage contractual relations.’19

In other jurisdictions, the severity of the conduct necessary to undercut a non-

damages-for-delay clause is not easy to identify. The Colorado Court of
Appeals adopted the following test:
‘… a plaintiff contractor or subcontractor claiming active interference on
the part of the defendant owner or contractee needs only to show that the
defendant committed an affirmative, willful act that unreasonably
interfered with the plaintiff’s performance of the contract, regardless
whether it was undertaken in bad faith. However, we further conclude
that, while it is unnecessary to show bad faith or reprehensible conduct,
active interference requires more than a simple mistake, error in
judgment, lack of total effort, or lack of complete diligence.’20

The language here is interesting. The passage cited above requires some
‘affirmative, willful act’ that ‘unreasonably interferes’ with the aggrieved
party’s performance, but the quality of the defendant’s conduct does not
appear tied to our traditional, sliding scale of malfeasance running from strict
liability to negligence to gross negligence to recklessness to willful misconduct.
Thus a mere ‘lack of total effort’ or ‘lack of complete diligence’ is insufficient
to escape the ‘no-damages-for-delay’ clause, but what exactly is sufficient to
invoke the exception?

Measured against the Colorado standard, for example, it is not entirely clear
whether the following conduct, described by a federal bankruptcy court
applying Florida law, would vitiate the ‘no-damages-for-delay’ clause:
‘In this case, EME [subcontractor] has established that HCC’s [joint
venture’s] actions amounted to more than mere ‘bureaucratic bungling.’
HCC failed to adequately schedule and coordinate EME’s and all other
trade contractors’ work on the Project. At the time EME signed the
Trade Contract, the overall project schedule was already hopelessly
marred, yet HCC failed to apprise EME of the problems the Project was
facing. Parts of the work EME was contracting to do were not
incorporated into the overall project schedule that was issued
immediately after EME signed the Trade Contract. To the extent HCC

19 Zachry Construction Corporation v Port of Houston Authority of Harris County, 449

S.W.3d 98, pages 116-118 (Tex 2014) (evidence was sufficient to uphold verdict against
owner based on owner’s insistence that contractor abandon its means and methods of
construction in favor of alternate means an methods imposed by owner).
20 Tricon Kent Company v Lafarge North America, Inc, 186 P.3d 155, pages 161-162 (Colo
App 2008).

8
 did not know of the problems with the electrical elements of the designs,
there is no excuse, because HCC should have known, for it was obligated
to complete a thorough pre-construction review. HCC’s failure to
properly schedule the Project resulted in severe trade stacking and an
extremely haphazard work flow. HCC’s failure to coordinate inspections
on the Project also resulted in inefficiencies. These failures amount to
HCC’s active interference with EME’s performance of its duties under
the Trade Contract, or, more precisely, its failure to act where there was
a duty to do so.’21

It is thus easy to state as a general rule that an owner’s interference with a

contractor’s performance may lead a court to withhold the protection of the
‘no-damages-for delay’ clause. On the other hand, there is no single definition
of ‘interference’ that stands as a reliable statement of what malfeasance is
sufficient in every jurisdiction; nor is there a uniform standard of misconduct
that separates actionable misconduct from immune misconduct.

Other exceptions

That is not to say that there are no exceptions that find more consistent support.
For example, the Supreme Court of South Carolina explains:
‘The most widely recognized exception to the enforceability of a no-
damage-for-delay clause is fraud, misrepresentation or bad faith. Clearly,
fraud, misrepresentation and bad faith in performance of one’s
contractual duties would give rise to a violation of the implied obligation
of good faith and fair dealing.’22

Another well-recognised exception is for an uncontemplated delay that is so

unreasonable (as to either cause or duration) as to constitute abandonment of
the contract. However, courts have also cautioned that ‘the [mere] length of
the delay does not transform a delay caused by an event specifically
contemplated by the ‘no-damages-for-delay’ clause into something
uncontemplated’.23

The common thread in these cases (and in the recognition of various other
exceptions, however stated) is that each party has a reasonable expectation of
performance by the other party, but they also recognise that relatively
blameless conditions may cause the other party to breach the contract. The
parties have the right to allocate their risks and liabilities at the outset of their
contract, moulding obligations (and pricing their performance) in an
appropriate manner. By the same token, each party also has the right to expect
performance from the other party (or, at least in this case, reasonable efforts
towards performance). When the performance of a party in breach falls so far
short of the reasonable expectation of the aggrieved party, courts have little
trouble in declining to enforce ‘no-damages-for-delay’ provisions.

21 In re Electric Machinery Enterprises, Inc 416 B.R. 801, page 891 (Bkrtcy MD. Fla 2009).
22 Williams Electricity v Metric Constructors, note 8, pages 133-134; 480 S.E.2d 447, page
449 (1997).
23 LoDuca Associates, Inc v PMS Const Management Corporation, 91 A.D.3d 485, page
486; 936 N.Y.S.2d 192, page 194 (2012).

9
What makes the application of these judicial sentiments somewhat nettlesome
is that the ‘no-damages-for-delay’ clause specifically contemplates trouble in
performance. And if trouble in performance is anticipated as the very reason
for the ‘no-damages-for-delay’ clause, what kind of ‘trouble’ is so
unconscionable as to warrant disregard of the clause?

Waiver

On a final note, in unusual cases it is actually possible for a party to waive

protection of the ‘no-damages-for-delay’ clause. Inasmuch as waiver
constitute the intentional relinquishment of a known right, the sort of conduct
that reflects an intentional relinquishment of a known right not to pay damages
is, well, the payment of damages. Thus we have the following example of
waiver of a ‘no-damages-for-delay’ clause:
‘… the Authority commendably acknowledged the damage the delay had
caused to Findlen and paid to Findlen $122,726 for ‘[e]xtra costs due to
job delays.’ That act, as documented, and other papers, which we detail
below, point to the resolution of the controversy. Parties to a written
contract may, of course, alter it subsequently, by oral modification, by
their joint conduct, or, ideally, by a writing subscribed to by the persons
to be bound. Words and actions of parties, such as statements in letters,
may effect a waiver or modification of a provision in a contract.
In itself, the Authority’s act of paying $122,726 on account of delay
stands for a waiver, at least to that extent, of the ‘no delay damages’
clause. Standing alone, however, one might hesitate to say that a single
waiver of that clause worked a comprehensive waiver. Here the
documentation comes into play. [The Authority through repeated
conduct acknowledged that the claim was incomplete and contemplated
additional information.] Taken together, the action of the Authority in
dealing with delay claims and the papers which indicate its intention so
to do as regards the plumbing subcontractor’s delay justify concluding
there was a waiver of the ‘no delay damages’ clause in this case.’24

Conclusion

For purposes of characterising American law so as to compare it with the law

of other countries, it is certainly accurate to say that ‘no-damages-for-delay’
clauses are a common mechanism employed in construction contracts to limit
delay damages arising from the promisor’s misconduct. For the most part,
they are enforceable and are prohibited by statute with respect to government
contracts in a few jurisdictions. On the other hand, there are well-recognised
exceptions to the enforceability of these clauses. It is far more difficult, on the
other hand, to elaborate a general statement for these. As we have noted above,
even those courts that find agreement in general principles – the supremacy of
mutual assent, for example – do not always agree on the ramifications of those
principles.

24 Findlen v Winchendon Housing Authority, 28 Mass App Ct 977, page 978; 553 N.E.2d
554, page 556 (1990) (citations omitted).

10
3 ‘No-damages-for-delay’ clauses: the English position25
Introduction
Any person accustomed to English construction law, and indeed English
construction contracts, will find ‘no-damages-for-delay’ provisions a curious
contrivance. The drafters of English construction contracts may have
conceived of such devices, yet decided not to deploy them in contractual
instruments. We may speculate as to why this is the case. Most likely, the
reason we do not see ‘no-damages-for-delay’ provisions in construction
contracts is because they are regarded as commercially unacceptable –
certainly to contractors and subcontractors, and perhaps also to employers
(owners) and consultants also. Indeed, the major standard forms expressly
confer a right on the contractor’s part to be paid compensation for delay or
disruption resulting from the employer’s conduct.26

What we do see, however, are provisions which in certain circumstances have

the effect of precluding the contractor from recovering costs, losses or other
damages from the employer where the employer has caused delay to the
contractor’s works. But we do not see any blanket provisions, such as those
found in the United States, which in a broad sweep exclude any entitlement a
contractor may otherwise have to recover damages for delays suffered by it
due to the employer’s breach of obligation.

The issue for us to consider is whether, from an English law perspective, there
is any legal basis for opposing the enforcement of either blanket ‘no-damages-
for-delay’ provisions, or of provisions which exclude the recovery of damages
for delay in particular situations, but not generally. English law, and primarily
English statute law, imposes controls (albeit ones expressed in general terms)
on the ability of a party to exclude or limit its liability for breach of contract or
negligence. Do ‘no-damages-for-delay’ clauses, whether of general or
particular application, offend these laws?

Illustrations

Before examining this issue in a little detail, it may be helpful to contextualise

the matter through illustrations of specific (as opposed to general) ‘no-
damages-for-delay’ clauses. Let us consider four examples of such clauses:27

1 The contract places a limitation on a contractor’s entitlement to recover

damages for employer delay, without excluding such entitlement
altogether

This limitation may be expressed as a monetary cap on the damages

recoverable, or the contract may expressly provide that the contractor is not

25 Consideration is given in this section to case law from England and from the British
Commonwealth. The Commonwealth cases cited may be taken as representative of the
application of English law.
26 See, for example, the JCT Standard Building Contract Without Quantities 2011, clauses
4.23 and 4.24.
27 There may, of course, be innumerable other examples one may give.

11
entitled to recover ‘indirect or consequential’ costs and losses, including off-
site overheads, or it may limit the period in respect of which damages may be
claimed.

To illustrate this last aspect, in the Hong Kong case of Brington Engineering v
Cheerise Asia the subcontract in issue provided relevantly as follows:
‘Loss and Expense Caused by Disturbance of Regular Progress of the
Works: Notwithstanding the Special Conditions of Contract Clause
SCC-11 (regarding Main Contractor’s Claim for Extension of Time) and
General Conditions of Contract Clause 24, it is now agreed after
negotiation that you [scil the subcontractor] shall not be entitled to claim
any loss and/or expense, extended preliminaries and prolongation costs
whether directly or indirectly incurred in respect of any matter for which
an extension of time has been granted pursuant to Clause 23 of the
General Conditions of Contract for the first 120 days …’28

No issue was taken as to the enforceability of this provision, nor was any doubt
expressed about it by the judge in the case.29

2 An obligation to compensate a contractor for employer delay may be

limited if the employer’s relevant performance obligation is qualified or
conditioned

If an employer is obliged to give possession of the site to the contractor by

‘tentative dates’, and it fails to hand over the site by those dates leading the
contractor to be delayed (and incurring additional cost), the contractor will
have no basis for claiming damages from the employer for its additional costs,
as the employer will not be in breach of contract. The employer did not
commit to hand over the site by the particular date. Such a tentative provision
was included in the subcontract (and the corresponding main contract) which
was the subject of another Hong Kong case. In Kim Hung Construction &
Engineering v Standard Refrigeration & Engineering, the court held:
‘… it is not open to the court to rewrite a contract on the ground of
commercial fairness. Standard [the subcontractor] did have the
opportunity to look at all the terms of the Main Contract before
committing itself to the project. Further, the terms of SP 6.02 are clear.
Any risk of additional expenditure being incurred by reason of the
difference between the actual dates of possession and the tentative dates
should be within the contemplation of Standard, and it was always open
to Standard to reflect such risk in the tender price. As the court cannot
turn a blind eye to the clear language of the relevant clauses, there is no
room for the court to disturb such allocation of risks between the parties
as clearly expressed in the Main Contract and the Sub-Contract …’30

28 Brington Engineering Ltd v Cheerise Asia Ltd [2011] HKCFI 567.

29 DHCJ Teresa Cheng SC, one of Hong Kong’s most experienced and distinguished
construction law practitioners.
30 Kim Hung Construction & Engineering Co Ltd v Standard Refrigeration & Engineering
Co Ltd [2013] HKCFI 100, para [43], DHCJ Lok. See also Tridant Engineering Co Ltd v

12
A notable feature of this conclusion is that the court recognised the contractual
autonomy of the parties, and in particular the ability of the subcontractor to
factor into its bid for the project the possibility of being delayed due to the
‘tentative’ dates for possession not being met. This, as we shall see, is a
powerful reason for the upholding of ‘no-damages-for-delay’ provisions,
although it by no means forecloses the issue of their enforceability. It is also
notable that the relevant wording of the subcontract was not in the form of an
exclusion or limitation clause, and yet it had the effect of excluding or limiting
the main contractor’s liability to the subcontractor for delayed possession.

3 Liability for employer delay may, in effect, be excluded where the

contract contains a notification and time bar provision

If such provisions are not correctly activated by the contractor in the event of it
being delayed, they deprive it of any entitlement to compensation for loss
suffered by it due to employer delay. Time bar provisions are a common
feature of construction and engineering contracts in England and
internationally, and broadly speaking are unobjectionable as a matter of law.31

4 Provisions equivalent to ‘no-damages-for-delay’ clauses have been

upheld by the English courts

The most notable case in this regard is Jones v St John’s College, Oxford.32
The contract in that case required the contractor to build certain farm buildings
by a specified date for the sum of £2,340. Liquidated damages were payable
for late completion at the rate of £3/day. The works proceeded, and during the
course of the works the employer instructed certain variations, which the
contractor duly executed. However, the effect of these variations was that the
contractor completed its works five and a half months late. The employer
claimed liquidated damages from the contractor for the five and a half month
period.
The Court of Queen’s Bench held that the employer was indeed entitled to
claim liquidated damages. To our modern modes and minds, such a result may
seem surprising.33 However, the reason the court firmly upheld the employer’s

Mansion Holdings Ltd [2000] HKCFI 1, para [11], DHCJ To (upheld [2001] HKCA 338,
[2001] 1 HKLRD 783).
31 See for example Obrascon Huarte Lain SA v A-G (Gibraltar) [2014] EWHC 1028
(TCC), paras [311]-[316], Akenhead J (considering clause 20.1 of the FIDIC Yellow
Book, 1st edition 1999) (appeal dismissed: [2015] EWCA Civ 712).
32 Jones v St John’s College, Oxford (1870) LR 6 QB 115. Appropriately, none of the
judges deciding the case attended the college or indeed the university. Cognate cases
from Australia and Hong Kong are (respectively) Reynolds v Strelitz (1901) 3 WALR
143 and Hsin Chong Construction (Asia) Ltd v Henble Ltd [2006] HKCFI 965.
33 It seems, however, that even contemporary commentators regarded the result as
unmeritorious, yet completely justified as a matter of law. See eg ES Roscoe, A Digest of
Cases Relating to the Construction of Buildings (Reeves & Turner, 1879), page 27, who
wrote: ‘This case exemplifies the way in which builders sometimes for the purpose of
business enter into stipulations which may turn out wholly one-sided; and it further
shows that when this happens the law will not help them, because, to quote Mr Justice
Hannen’s judgment: ‘if a man does in direct terms enter into a contract to perform an
impossibility subject to a penalty, he will not be excused because it is an impossibility’.’
Some modern commentators have even suggested that modern tribunals would not

13
right to liquidated damages was that the contract clearly contemplated the
employer claiming such damages in the particular circumstances. The clause
in question relevantly provided that:
‘That the contractors shall not … make or allow any alteration or
addition to, or deduction from, the works of the contract … which shall
cause additional cost to the college beyond the said sum of £2,340 …
unless an order in writing, signed by clerk of works, and countersigned
by the bursar of the college, shall have been previously delivered … And
further, that the period or periods for completing all such alterations or
extra works shall not exceed the period limited by these presents for the
completion of the works contractor for, unless an extension of time be
also allowed by order specifying the limit of extension, signed by the
clerk of the works and bursar ... no such alteration, addition, deduction,
change, or deviation shall in any way exonerate the contractors from the
specific performance in every respect, of all the works of the contract
within the time named in their contract …’34

Although additional work had been instructed, and the contractor delayed as a
result, the contractor had committed itself to completing its works by a
particular date, and it did not have an extension of time certificate signed by
the clerk of works and the bursar of the college. The plain wording of the
contract compelled this conclusion. The court therefore held that the
contractor was bound to complete the works within the time stipulated in the
contract, and the employer would be entitled to liquidated damages.

We may note that the relevant contractual provision in Jones v St John’s

College, and indeed the issue before the court, concerned the effect on the
parties’ rights and obligation of the employer lawfully instructing variations
which delayed the contractor. For variations, at least, for which the contractor
had not been granted an extension of time, the contractor was not entitled to
additional payment due to the duration of its works being prolonged. There
was, so to speak, ‘no damages for delay’ caused by the employer, where the
delay resulted from a variation. The clause did not cover the position where
the contractor was delayed by an employer’s breach of contract, and the case
does not consider whether it would be possible for a contract to stipulate that
the employer should not be liable to the contractor for delay costs attributable
to the employer’s breach of contract. We now consider whether such a
provision would be enforceable as a matter of English law.

Enforceability: at common law

The starting point (or indeed the cynosure) for considering the enforcement of
any contractual provision under English law is ‘freedom of contract’. The
ability of able and informed persons to enter into contracts on terms of their
choosing has been central to the development of English contract law, of
which ‘construction law’ may be seen as forming a part. One illustration of

uphold such a provision: Michael Sergeant and Max Wieliczko, Construction Contract
Variations (Informa, 2014), para 12.64. Whether such an approach would be permissible
is discussed below.
34 Jones v St John’s College, Oxford, note 32, page 120.

14
this should suffice. As the greatest judge of the Victorian era, Sir George
Jessel MR, held in Printing and Numerical Registering Co v Sampson:
‘... if there is one thing which more than another public policy requires it
is that men of full age and competent understanding shall have the
utmost liberty of contracting, and that their contracts when entered into
freely and voluntarily shall be held sacred and shall be enforced by
Courts of justice.’35

If, therefore, a legally competent employer and contractor enter into a contract
which contains a ‘no-damages-for-delay’ provision, such a provision will be
upheld as a matter of law unless there is a legally recognised ground for
refusing to enforce it. In relation to such provisions, the question is whether
there is any principle of English common law which may operate so as to
displace such a provision and render it ineffective. It is suggested, in this
regard, that there are two possible grounds for impugning a ‘no-damages-for-
delay’ clause.

The doctrine of repugnancy

This is a common law rule to the effect that where a party undertakes an
obligation (such as, in the case of an employer, to provide the contractor with
access to the work site), but the obligation is expressed to be subject to a
proviso that the person is not personally liable for the performance or non-
performance of the obligation, the proviso is void on the basis of it being
repugnant to the obligation. As Lord Denning once put it:
‘There are scores of cases in the books, from the Year Books onwards,
where a party to a contract has sought, all in the same document, to give
with one hand and take away with the other. The courts have not
allowed him to get away with it.’36

Does a ‘no-damages-for-delay’ provision fall foul of this prohibition? Insofar

as breaches of contract are concerned, it is arguable that they do. If an
employer breaches its obligation to provide the contractor with access to the
site by a particular date, and the contractor is thereby delayed and suffers loss,
a ‘no-damages-for-delay’ provision – if upheld – has (on one view) the
potential to render the employer’s obligation almost illusory. However, the
competing and (it is suggested) more persuasive view is that a ‘no-damages-
for-delay’ clause does not abnegate an employer’s obligations to take
necessary action in a timely way so as to permit the contractor to perform its
works. It merely limits the employer’s liability in the event of it breaching that
obligation, so that it may not be required to compensate the contractor for any
breach. The contractor will usually have the remedy of a contractual extension
of time should the employer’s breach of contract cause it to be delayed, so it is
not the case that employer is giving with one hand and taking everything away
with the other.

35 Printing and Numerical Registering Co v Sampson (1875) LR 19 Eq 462, page 465.

36 Adams v Richardson & Starling Ltd [1969] 1 WLR 1645 (CA), page 1649.

15
The so-called ‘prevention principle’

At common law, this precludes the employer from relying on a ‘no-damages-

for-delay’ provision, at least where the employer’s breach of contract causes
the contractor to be delayed. As described by Jackson J (as he then was):
‘The essence of the prevention principle is that the promisee cannot
insist upon the performance of an obligation which he has prevented the
promisor from performing.’37

An employer, therefore, is not – as a matter of generality – entitled to insist

that a contractor perform its works by a contractually-stipulated date if the
employer’s breach of contract prevents the contractor from doing so. But that
is not the essence of a ‘no-damages-for-delay’ clause. It does not contrive to
entitle the employer to insist upon the contractor’s timely performance of it
works, notwithstanding the employer’s delay-inducing conduct. What it does
is to exculpate the employer from any liability to pay damages to the contractor
should its works be delayed due to the employer’s breach of contract. A ‘no-
damages-for-delay’ clause is an exclusion clause – a shield for the employer.
It is not an instrument by which the employer may seek to punish the
contractor for non-performance. Thus, the ‘prevention principle’ can be of no
application to ‘no-damages-for-delay’ clauses.

We may therefore conclude that a ‘no-damages-for-delay’ provision would

probably not be objectionable as a matter of English common law.

Enforceability: English statute law

In a business context, the only relevant statute which may proffer an

opportunity for impugning a ‘no-damages-for-delay’ clause is the Unfair
Contract Terms Act 1977 (UCTA), whose present text reads:
‘3(1) This section applies as between contracting parties where one of
them deals on the other’s written standard terms of business.
(2) As against that party, the other cannot by reference to any contract
term –
(a) when himself in breach of contract, exclude or restrict any
liability of his in respect of the breach; or
(b) claim to be entitled –
(i) to render a contractual performance substantially different
from that which was reasonably expected of him; or
(ii) in respect of the whole or any part of his contractual
obligation, to render no performance at all,
except in so far as (in any of the cases mentioned above in this
subsection) the contract term satisfies the requirement of
reasonableness.’

37 Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No 2) [2007] BLR
195 (TCC), para [47].

16
Section 3(2) therefore has the potential to render unenforceable a provision of
a contract that excludes or limits a party’s liability for non-performance of its
contractual obligations. However, section 3(1) makes section 3(2) applicable
only where a party is using its written standard terms of business. It originally
also applied to protect consumers against traders in relation to contract terms
within section 3(2); but the fairness of terms within such contracts (and more
besides) will soon be regulated by the Consumer Rights Act 2015.38 Despite
these changes, it remains true that, as a matter of English statute law, there can
be no general objection to ‘no-damages-for-delay’ clauses. A ‘no-damages-
for delay’ provision will not fall foul of UCTA if it is used in a negotiated
commercial contract, though is more problematic in a consumer context.

If, however, a party’s written standard terms of business do contain a ‘no-

damages-for-delay’ provision, which perforce has the effect of limiting the
employer’s liability for breach of contract, the clause will only survive – and
be upheld – if it satisfies the ‘requirement of reasonableness’.

How, then, is a ‘no-damages-for-delay’ clause to be evaluated under section

3(2) of UCTA? Is such a clause ‘reasonable’, or not? It is difficult to proffer a
confident answer to these questions, as UCTA challenges have proven to be
protean matter, their outcome being difficult to predict. To a large measure,
we must feel our way forward in cases concerning novel exclusion and
limitation clauses by examining earlier cases concerned with cognate subject
matter.

In this regard, we may observe that contractual provisions which purport to act
as a general exclusion of liability for breach of contract have attracted the
operation of UCTA, and have not been enforced.39 A contractual provision
may not be regarded as ‘reasonable’ if its effect is to render nugatory the stated
contractual obligations of a party. It is unreasonable that there can never be
any remedy for a breach of contract. But where, by contrast, a contract offers
some remedy for a breach of contract, but it circumscribes the extent of that
remedy, questions of reasonableness may be viewed as shades on a spectrum.
Thus, contractual provisions which limit a party’s liability to its ‘fair share’ of
a loss (as is the case with net contribution clauses), 40 or which render
irrecoverable certain types of loss or damage (such as ‘indirect or
consequential loss or damage’)41 may pass through the fire of UCTA intact.
These clauses may be seen as taking away a contracting counterparty’s

38 See now the Consumer Rights Act 2015 sections 61-63 (tests of unfairness and their
applicability), Schedule 2, para 2 (examples of potentially unfair provisions) and
Schedule 4 (amendments of UCTA 1977). The relevant provisions of the Consumer
Rights Act are anticipated to take effect in October 2015.
39 For example, Ramsey J held a provision in a warranty agreement concerning a printing
press unreasonable that purported to exclude liability for ‘immediate loss’ or other direct
loss suffered due to the press malfunctioning: Lobster Group Ltd v Heidelberg Graphic
Equipment Ltd [2009] EWHC 1919 (TCC), para [130]. The effect of this clause was to
exclude the supplier’s liability for any faults with the printing press.
40 See in this regard West v Ian Finlay & Associates [2014] EWCA Civ 316, 153 Con LR 1,
[2014] BLR 324.
41 See Lobster Group v Heidelberg Graphic Equipment, note 39, paras [131] and [148].

17
remedies, but not in their entirety. Functioning in this way, they may satisfy
the all-important ‘requirement of reasonableness’.

Given this, and given that ‘no-damages-for-delay’ clauses do not operate so as

to exclude a contractor from all contractual remedies in the event of an
employer causing delay to its works – the contractor will usually have the right
to an extension of time – it may be reasonable to conclude that such clauses
would not fall foul of UCTA.

Conclusion

Although it is conceivable that ‘no-damages-for-delay’ clauses could be

challenged as a matter of English law (both under common law and statute), it
seems more likely than not that they would be upheld by English courts, at
least in a non-consumer context. That said, the attitude that an English court
could take to a ‘no-damages-for-delay’ clause would be likely to be influenced
in some way by the circumstances in which a party sought to rely upon it. We
may expect an English court to take hard against a deliberate or reckless
breach of contract giving rise to contractor delay, just as the US courts have
done.

4 Differing site conditions: the US position

The aphorism that ‘necessity is the mother of invention’ finds a nice
illustration in the law governing differing site conditions. In the eyes of
contractors, the ‘necessity’ of specific clauses arises from the general lack of
sympathy that courts have shown to promisors when a particular promise
proves more difficult to perform than the promisor originally anticipated.

Of course, that lack of sympathy was neither born in, nor restricted to,
construction contracts. Rather, courts will allow a party to avoid a contractual
obligation only when the promised performance is impossible, not when it is
merely difficult or expensive. The ‘invention’ then is the ‘differing site
conditions’ clause, under which a contractor can find relief (contrary to the
common law) when its performance may be possible, but is more difficult,
time-consuming or expensive than originally anticipated.

As we look at these ‘differing site conditions’ clauses, then, we begin with the
nature of a contractor’s obligations absent such a clause. We thereafter turn to
a prototypical clause and see how this ‘invention’ relieves a contractor of
otherwise burdensome obligations.

In contrast to the treatment of ‘no-damages-for-delay’ clauses, judicial

acceptance and enforcement of differing site conditions clauses is relatively
uniform among the fifty States and federal cases. A party arguing for relief
under a ‘differing site conditions’ clause can expect that judicial decisions
from other jurisdictions will be persuasive, and one can state general principles
concerning these clauses with more confidence than with respect to ‘no-
damages-for-delays’ clauses.

18
Relief for differing site conditions under common law
General rule

Prior to the widespread use of ‘differing site conditions’ clauses, contractors

had little protection against concealed conditions that rendered their
performance more expensive. Rather, courts understood that a contractor who
contracted to build a structure essentially promised to deliver the structure for
the price stated in the contract, and in so doing accepted any difficulties of
construction, expected or otherwise. As explained by the US Supreme Court
in Dermott v Jones, rejecting a contractor’s plea for additional compensation in
the face of adverse subsurface conditions:
‘This covenant [to complete the buildings ‘ready for use and
occupation’] was [the contractor’s] duty to fulfill, and he was bound to
do whatever was necessary to its performance. Against the hardship of
the case, he might have guarded by provision in the contract. Not having
done so, it is not in the power of this court to relieve him. … [This
principle] rests upon a solid foundation of reason and justice. It regards
the sanctity of contracts. It requires parties to do what they have agreed
to do. If unexpected impediments lie in the way, and a loss must ensue,
it leaves the loss where the contract places it. If the parties have made
no provision for a dispensation, the rule of law gives none. It does not
allow a contract fairly made to be annulled, and it does not permit to be
interpolated what the parties themselves have not stipulated.’42

This brings an interesting comparison to the circumstances of Hadley v

Baxendale, in which Baron Alderson reflected that it would be unfair to visit
the economic consequences of unanticipated delays on the promisor: if only
the promisor knew it would bear the consequences of unanticipated
consequences, it could negotiate protection against such consequences in
advance.43 The same might be said of contractors who build on property they
do not own in a location they do not choose: if they know in advance that they
will assume the burden of unexpected conditions, they can negotiate for
protection. If they elect not to negotiate protection, the courts will not provide
it for them.

In one nineteenth-century case, for example, a Minnesota contractor erected a

building on what proved to be quicksand, as a consequence of which the
building collapsed during construction of the third floor. Apparently the
lesson ‘once burned, twice shy’ had not reached Minnesota by the following
year, as the contractor again commenced construction only to see the work
collapse. The owner (employer) sued for breach of contract, and prevailed.
As the Minnesota Supreme Court saw it in Stees v Leonard, the owner’s right
to recover was clear:
‘If a man bind himself, by a positive, express contract, to do an act in
itself possible, he must perform his engagement, unless prevented by the
act of God, the law, or the other party to the contract. No hardship, no

42 Dermott v Jones, 69 US 1 (Sup Ct), pages 7-8, 17 L Ed 762 (1864).

43 Hadley v Baxendale: note 4.

19
 unforeseen hindrance, no difficulty short of absolute impossibility, will
excuse him from doing what he has expressly agreed to do. This
doctrine may sometimes seem to bear heavily upon contractors; but, in
such cases, the hardship is attributable, not to the law, but to the
contractor himself, who has improvidently assumed an absolute, when
he might have undertaken only a qualified, liability. The law does no
more than enforce the contract as the parties themselves have made it.’44

Alas, it took half a century after Dermott v Jones and Stees v Leonard for such
contractual protections to become commonplace and settled; we shall see
shortly the general contours of such protection.

That is not to say that contractors were helpless in such circumstances, of

course. In the face of responsibility for concealed site conditions, contractors
could (and can) simply bid prices that mitigate the risk of unforeseen expenses.
At least theoretically, owners (employers) in the long run pay for differing site
conditions in the broad marketplace for construction services by paying
additional compensation for each contract, at least when the market is not
overpopulated with contractors who gamble on favorable site conditions by
bidding lower than such protection otherwise counsels.

Common law exceptions

At common law, there were two specific circumstances under which an owner
might bear the additional construction costs attending concealed subsurface
conditions. The first was when the owner expressly represented the nature of
the subsurface conditions to the contractor. In such circumstances, a
contractor was entitled to rely on factual representations from the owner in
bidding the job, and to the extent the actual facts varied from those represented
by the owner, the contractor was entitled to recover additional compensation.
An owner could enjoy protection against such liability by not making express
representations as to subsurface conditions.

Express misrepresentations are relatively easy bases for liability on the part of
the owner. But might the protection go further? In the watershed case of US v
Spearin, the US Supreme Court held that an owner’s imposition of an
obligation to build a structure in strict accordance with plans and specifications
furnished by the owner implies a warranty by the owner that the plans and
specifications are suitable for construction of the structure in question:
‘In the case at bar, the sewer, as well as the other structures, was to be
built in accordance with the plans and specifications furnished by the
government. The risk of the existing system proving adequate might
have rested upon Spearin, if the contract for the dry dock had not
contained the provision for relocation of the 6-foot sewer. But the
insertion of the articles prescribing the character, dimensions and
location of the sewer imported a warranty that if the specifications were
complied with, the sewer would be adequate. This implied warranty is
not overcome by the general clauses requiring the contractor to examine

44 Stees v Leonard 20 Minn 4941 (1874).

20
 the site, to check up the plans, and to assume responsibility for the work
until completion and acceptance.’45

The Spearin doctrine, as the implied warranty has come to be known, applies
only to plans and specifications that direct the contractor as to the precise
manner of performance (design specifications), as opposed to merely
describing the final result to be achieved (performance specifications). Where
the plans and specifications leave the precise manner of performance to the
contractor, Spearin does not apply and the contractor continues (absent
contractual protection) to bear the burden of adverse site conditions. In the
words of Spearin, for example, the Supreme Court’s decision rested heavily on
the fact that the contract set out the specific ‘character, dimensions and
location of the sewer.’46

The contractual solution

An obvious mechanism for dealing with potentially adverse site conditions is
only to contract on a ‘cost plus’ basis, under which the owner (employer) bears
all costs of construction. Under such a contract, concealed site conditions are
rarely problematic for the contractor, because the contractor does not bear the
economic burden of surprises.47 At the same time, owners generally do not
favour ‘cost plus’ contracts, so alternative solutions are required.

The most common solution is to include a ‘differing site conditions’ clause,

under which the owner bears any additional costs of construction attributable
to adverse site conditions. However, not all adverse site conditions fall within
the scope of most ‘differing site conditions’ clauses, but rather only two types
of differing conditions, as exemplified by the following clause, taken from
Federal Government contracts under the Federal Acquisition Regulation:
‘The Contractor shall promptly, and before the conditions are disturbed,
give a written notice to the Contracting Officer of:
1. [Type I] Subsurface or latent physical conditions at the site
which differ materially from those indicated in this contract, or
2. [Type II] Unknown physical conditions at the site, of an
unusual nature, which differ materially from those ordinarily
encountered and generally recognized as inhering in work of the
character provided for in the contract.

45 United States v Spearin 248 US 132, pages 136-137; 39 SCt 59, page 61 (US 1918).
46 Although Spearin arose in the context of subsurface construction, it application has
grown far beyond differing site conditions cases. Indeed, Spearin is not typically taught
as a differing site conditions case, but rather as imposing an implied warranty of
suitability of plans and specifications for construction writ large. Its limited relevance to
differing site conditions claims is that when plans and specifications dictate how
subsurface construction is to be accomplished, those plans and specifications will bear
with them a warranty that the site conditions are such as will admit of the construction
dictated.
47 A delay due to differing site conditions can cause monetary losses that are not
compensated even under a ‘cost-plus’ contract, such as additional home office overheads
and other expenses that contractors charge as lump-sum items, but actually increase over
time.

21
 The Contracting Officer shall investigate the site conditions promptly
after receiving the notice. If the conditions do materially so differ and
cause an increase or decrease in the Contractor’s cost of, or the time
required for, performing any part of the work under this contract,
whether or not changed as a result of the conditions, an equitable
adjustment shall be made under this clause and the contract modified in
writing accordingly.’48

These two types of differing site conditions are typically referred to by their
identification in Federal contracts. Type I conditions – conditions varying
from those indicated in the contract documents – were compensable even at
common law. The inclusion in a contract is nonetheless beneficial, as it
removes any question of fault or justifiable reliance as might otherwise be
required to prove an actionable misrepresentation in tort.

Type II conditions, however, are precisely the sort of conditions that do not
admit of claims for additional compensation in the face of the common law
rule articulated in Dermott v Jones.49 It should be noted that the clause does
not provide compensation for all site conditions that differ from those
subjectively anticipated by the contractor, but only those ‘those ordinarily
encountered and generally recognised as inhering in work of the character
provided for in the contract.’ In short, knowledge of site conditions that
contractors performing similar work should reasonably anticipate will be
attributed to the actual contractor.

How does a Type II ‘differing site conditions’ clause provide relief where the
common law does not? Simply put, it directly shifts the burden of adverse site
conditions to the owner/employer, except where a reasonable contractor would
have anticipated the possibility of such adverse conditions.

The owner’s response

In the face of a ‘differing site conditions’ clause, it is wise for the

owner/employer to ensure that the contractor is as educated as is reasonably
(and economically) possible in advance of pricing the construction work. One
means of educating the contractor is to secure detailed geotechnical reports in
advance of asking for tenders. Of course, preconstruction geotechnical studies
do not eliminate differing site condition claims. There are scientific and
practical limitations on such studies, and their cost limits the pre-tender
information available to owners/employers and contractors.

A second mechanism is for the owner/employer to shift at least part of the

burden of site investigation to the contractor. A companion to the ‘differing
site conditions’ clause set out above, for example, imposes the following
obligations on the contractor:
‘(a) The Contractor acknowledges that it has taken steps reasonably
necessary to ascertain the nature and location of the work, and that it has
investigated and satisfied itself as to the general and local conditions

48 48 C.F.R. §52.236–2.
49 Dermott v Jones: note 42.

22
 which can affect the work or its cost … The Contractor also
acknowledges that it has satisfied itself as to the character, quality, and
quantity of surface and subsurface materials or obstacles to be
encountered insofar as this information is reasonably ascertainable from
an inspection of the site, including all exploratory work done by the
Government, as well as from the drawings and specifications made a part
of this contract. Any failure of the Contractor … will not relieve the
Contractor from responsibility for estimating properly the difficulty and
cost of successfully performing the work, or for proceeding to
successfully perform the work without additional expense to the
Government.’50

When a contractor submits a claim on the basis of differing site conditions, the
owner’s response is often that the contractor would have known about the
potentially differing site conditions – and included construction in such
conditions in its bid – if only it had ‘taken steps reasonably necessary’ to
ascertain the site conditions.

Judicial balance

The question yet remains where courts should balance the parties’ interests and
obligations between the obligation to conduct pre-bid investigations and the
right to be compensated for differing site conditions. One Federal court
recently weighed the opposing interests and found the solution inherent in the
contract itself:
‘[The Differing Site Conditions clause quoted above] … exists precisely
in order to ‘take at least some of the gamble on subsurface conditions out
of bidding’: instead of requiring high prices that must insure against the
risks inherent in unavoidably limited pre-bid knowledge, the provision
allows the parties to deal with actual subsurface conditions once, when
work begins, ‘more accurate’ information about them can reasonably be
uncovered. …

For that reason, even requirements for pre-bid inspection by the

contractor have been interpreted cautiously regarding conditions that are
hard to identify accurately before work begins, so that ‘the duty to make
an inspection of the site does not negate the changed conditions clause
by putting the contractor at peril to discover hidden subsurface
conditions or those beyond the limits of an inspection appropriate to the
time available’.’51

The court thus found that a ‘reasonable’ pre-bid (‘pre-tender’) obligation is to

conduct ‘an inspection appropriate to the time available.’ It should be noted
that a ‘reasonable’ pre-bid inspection is further limited by economic
sensibility: even in cases in which the contractor has weeks to prepare a bid, a
‘reasonable’ contractor would limit the cost of a pre-bid investigation. What

50 48 C.F.R. §52.236–3.
51 Metcalf Construction Company, Inc v United States, 742 F.3d 984, page 996 (Fed Cir
2014), quoting in part Foster Construction CA & Williams Brothers Co v United States,
193 Ct Cl 587, 435 F.2d 873, (1970), page 887.

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might a ‘reasonable’ cost be? There is no simple answer, for better or worse,
but it is worth observing that the owner itself almost always retains a
geotechnical engineer to assess the suitability and requirements of building in a
particular location, and the scope of the owner’s inquiry might well educate the
court as to the balance between reckless guesswork and inefficient
omniscience.52

5 Differing site conditions: the English position

The general position
The common question ‘who takes the risk of bad ground under English law?’
yields a clear, if qualified, answer. It is that the risk of bad ground, or
expressed more accurately and comprehensively ‘unforeseen site conditions’,
may be allocated along whatever contractual lines the parties choose.

If, however, the parties have reached no express agreement on the risk of
adverse site conditions being encountered, English law is clear that, for a
fixed-price contract, it is the contractor who bears the risk of being delayed or
disrupted, or incurring additional cost, because its works are more difficult or
expensive to perform than it anticipated (and could have anticipated).

This approach is vividly illustrated by a railways case from Devon late in the
Victorian era, which involved the construction of a railway for a lump sum of
£42,600. The contractor encountered substantial quantities of hard rock during
its excavations, which caused delay and rendered the contract uneconomic for
it.

Despite this, the nature of the contractor’s obligations was described by AL

Smith LJ (as he then was) thus:
‘It seems to me … that it is an absolute contract; whether [the contractor]
found rock in a small degree, or whether [the contractor] found rock in a
large degree, the agreement was to do the work for £42,600.’53

As a consequence of this approach, English law requires a contractor who is

motivated to avoid accepting the contractual risk of adverse site conditions
being unexpectedly encountered to seek a contractual stipulation which
ameliorates the economic impact of such matters. However, as a matter of
practice in the United Kingdom, it is pertinent to observe that the major
standard form of construction contract – the Joint Contracts Tribunal form –
does not entitle the contractor to time or money relief if adverse conditions are
encountered. Yet it would be inaccurate to suggest that this somehow
represents a generally accepted allocation of risk. It is always a question of
negotiation.

52 It must be noted that not all differing site conditions are the types of conditions that
geotechnical engineers should (or can) uncover. Indeed, some contractors are as well
suited to predicting construction conditions as engineers, but the scope of such
considerations is outside our present consideration.
53 Re Nuttall and Lynton and Barnstaple Railway Company (1899) Hudson’s BC (4th
edition, volume 2) 279, page 286.

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Thus far, we can see that English law is essentially on all fours with US law in
relation to unforeseen site conditions. However, as we shall now see, there is
one aspect of the law concerned with unforeseen site conditions where there is
a stark contrast between US and English law.

Information provided by the employer to the contractor

In every construction or engineering project, it is necessary for an employer
(owner) to communicate a certain level of information to the contractor about
the proposed works before the contractor agrees to undertake them. There are,
in this regard, at least two types of information which are pertinent:

1 Information as to the works the employer wishes to have performed

This, of course, is fundamental to any project; however, there are various

forms that such information may take. At one extreme, it may consist of a
basic, general description of what the employer would like to have constructed,
for example ‘a five-bedroom house’. At the other end of the spectrum, the
work that the employer wishes to have performed may be expressed in great
detail in the form of design drawings, specifications, and the like, so that all
the contractor is required to do is build the structure, as shown in the drawings.

2 Information concerning the conditions on site

Such information may have been obtained from soil investigations, from
geological or meteorological records for the area of the site, from records kept
by the employer of man-made structures already on site (such as the locations
of pipes and other services) or other concealed features or obstacles,54 or from
other sources. Under English contract law, an employer has no legal
obligation at common law to provide any such information to a contractor,
should this information form part of its business records. However, from a
practical perspective there may be great utility in the employer providing this
information to the contractor, so as to enable the contractor to anticipate
difficulties which may arise and better manage them, rather than stumble upon
then during the course of the works, leading to unexpected delay and cost
overrun.

There is an obvious interrelationship between the two types of information.

The possibility of building what the employer would like to have built is
dependent on the conditions at site. A structure may be ably constructed on
one site, but difficult or impossible to build on another site due to the site’s
conditions. If, therefore, the employer has provided information regarding site
conditions which indicate that they are more favourable than in fact they are –
so as inevitably to necessitate an amendment to the employer’s design, the
contractor’s method of working, or both – two consequences will be almost
inevitable: the project will be delayed, and the costs incurred by the contractor
will increase.

54 Which could include, for example, known pollution on site.

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The question which then arises is: which party bears the risk of delay and
increased cost due to site conditions being more adverse than anticipated?
From an English law perspective, as we have seen, the starting point will be
that the contractor is required to do what he has contracted to do, and the fact
that matters turned out for the worse (due to unanticipated site conditions) does
not relieve him of his obligations, just as the encountering of more favourable
site conditions than anticipated would not confer upon the employer any right
to a discount on a fixed contract price.

This position is, however, susceptible to modification by contract, and it is

common for standard forms of contract to confer some measure of relief on a
contractor whose works are affected by adverse site conditions.

Contractual conditions aside, the issue which we must consider is that

adjudicated upon by the US Supreme Court in Spearin, where Justice Brandeis
(for the court) concluded that:
‘[I]f the contractor is bound to build according to plans and
specifications prepared by the owner, the contractor will not be
responsible for the consequences of defects in the plans and
specifications. This responsibility of the owner is not overcome by the
usual clauses requiring builders to visit the site, to check the plans, and
to inform themselves of the requirements of the work.’55

Spearin concerned works at the Brooklyn Navy Yard. The employer provided
the contractor with drawings relevant to the contractor’s works, showing where
sewer pipes were located. What the drawings did not show was that there was
a dam in a relocated sewer pipe. After heavy rains, the effect of the dam was
to cause water to back up, flooding the contractor’s works. The contractor
could not reasonably have anticipated that this would occur. Thus, the effect
of Spearin is to relieve a contractor of the deleterious consequences which may
flow from site conditions being different to those described by the owner.

Do the English courts take the same, similar or a wholly different approach to
that taken in Spearin? As we shall now see, the answer is ‘wholly different’.

English law illustrated: Thorn v London Corporation

A case which vividly illustrates the contrasting approaches of the English and
US courts is Thorn v The Mayor and Commonalty of London, a decision of the
House of Lords.56 The case concerned a contract for the construction of a new
bridge at Blackfriars, London, over the river Thames – a bridge which still
stands today. The new bridge was designed for the effective employer, the
Bridge Committee of the Corporation, by the engineer Joseph Cubitt. In
Cubitt’s plans for the works, the piers for the bridge were to be constructed
using iron caissons, which were to be sunk into the river bed. Once in place,

55 United States v Spearin, note 45, page 136 (1918) (citations omitted).
56 Thorn v The Mayor and Commonalty of London (1876) LR I App Cas 120. The House of
Lords was then the United Kingdom’s apex court, ie equivalent to the US Supreme
Court. The UK’s highest appellate court, separated physically and constitutionally from
the Upper House of Parliament, is now the Supreme Court.

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the piers of the bridge could be constructed inside a watertight area, and would
be unaffected by the tidal movement along the Thames.

Unfortunately, Cubitt’s proposed method of working was found to be

unsuitable. The caissons could not resist the flow of water in the river, and as
a consequence an amended method of working was introduced without using
some of the caissons. The effect of this was to increase the time taken for the
works, because the contractor’s ability to work would be subject to tidal
conditions. This, in turn, increased the cost of performing the works.

The contractor, who was engaged to build the bridge by following the
employer-provided design, sued the employer for the additional cost it incurred
due to the change in design which was necessitated by the error in Cubitt’s
plans. The terms of the contract did not expressly address the specific problem
encountered, namely whether the contractor was entitled to monetary or other
relief should the method of working required by the engineer’s design turn out
to be inherently unsuitable in the particular circumstances.

The contractor’s action against the employer was founded on a term which the
contractor contended should be implied in the contract as a matter of the
parties’ common (yet unexpressed) intention:
‘If a man enters into a contract by which he binds another to do certain
work for him at a certain place, he impliedly undertakes that the place
shall be free and for the work to be done there. So, if he stipulates that
the work shall be done in a certain manner, he undertakes that it can be
done in that manner.’57

The contractor’s argument was that the employer breached this warranty by
requiring the contractor to perform works according to a defective design,58
with the consequence that the contractor was entitled to damages representing
its additional costs during the period of prolongation of the works.

When the case was argued before the House of Lords, their Lordships
evidently took so dim a view of this proposed implied term that counsel for the
employer was not called upon to make submissions to the House. In
considering why such an implied term should not be found, the Lord
Chancellor – Lord Cairns – said the following in his speech:
‘My Lords, if the contractor in this case had gone to the Bridge
Committee [the employer] … and had said: You want Blackfriars Bridge
to be rebuilt; you have got specifications prepared by Mr Cubitt; you ask
me to tender for the contract; will you engage and warrant to me that the
bridge can be built by caissons in this way which Mr Cubitt thinks

57 Thorn, note 56, page 123 (arguendo, Mr Judah Philip Benjamin QC – a man prone to
supporting lost causes, including – before the American Civil War – the maintenance of
slavery in America, and in London seeking to overturn the fourteen-year sentence given
to the Tichborne claimant). Such was Mr Benjamin’s fame that, in an early Hong Kong
construction case, Piggott CJ described him (with reference to his arguments in Thorn) as
‘one of the cleverest lawyers at the Bar’: Lau Yeong Wood v Standard Oil Co of New
York [1908] HKLR 53, page 61.
58 Defective, that is, given the environment in which the works were to be performed.

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 feasible, but which I have never before put in practice. What would the
committee have answered? Can any person for a moment entertain any
reasonable doubt as to the answer he would have received? He would
have been told: You know Mr Cubitt as well as we do; we, like you, rely
on him – we must rely on him; we do not warrant Mr Cubitt or his plans;
you are as able to judge as we are whether his plans can be carried into
effect or not; if you likely to rely on them, well and good; if you do not,
you can either have them tested by an engineer of your own, or you need
not undertake the work; others will do it.’59

This encapsulates the English approach to the allocation of contractual risks

that work is more difficult or expensive to perform due to unexpected site
conditions. What it boils down to is this: if a contractor promises to do certain
work, whether on the basis of his own design or a design provided to him, he
must do that work for the agreed contract price and within the time limits for
doing so. A contract may confer upon a contractor entitlements to additional
time and money if unexpectedly adverse site conditions are encountered;
however, if it does not do so, there will be no implied term of the contract
which confers upon the contractor any such relief.

In short, English law says to contractors: ‘do your due diligence before you
sign a contract’. If unexpected matters arise, including those that the employer
may be better placed to know of as compared to you, they do not relieve you of
your contractual commitment to build a structure for price £n by date Y.

Justice Brandeis’ famous statement in Spearin that ‘if the contractor is bound
to build according to plans and specifications prepared by the owner, the
contractor will not be responsible for the consequences of defects in the plans
and specifications’, 60 represents the very antithesis of English law, as
articulated in Thorn.

6 Conclusions
As our study shows, English and American law have taken very different paths
with respect to the allocation of responsibility for differing site conditions.
The treatment of ‘no-damages-for-delay’ clauses might well be the same under
our shared common law principles, but the relative rarity of such clauses in
English contracts leaves the question unanswered.

What may also be said with fair assurance is that American law has followed
English law in its underlying respect for the ability of parties to fashion their
own commercial relationships and the reluctance of courts to interfere with
private bargains except in cases of true injustice or abuse, as reflected in the
American jurisprudence on ‘no-damages-for-delay’ clauses. Indeed, the robust
jurisprudence in the United States related to both ‘no-damages-for-delay’ and
‘differing site conditions’ clauses arose precisely because such clauses are

59 Thorn, note 56, page 129. The other Law Lords – Chelmsford, Hatherley and O’Hagan –
gave speeches in similar, if less excoriating, terms.
60 The main text linked to note 55.

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common in American contracts as a means of ordering the parties’
relationships.

Were English contracts to employ these clauses, it would be nice to think that
those courts could harvest some of the judicial opinions grown from the seeds
of English common law.

Stephen A Hess is an attorney at Sherman & Howard LLC in Denver,

Colorado and editor of The Construction Lawyer, the American Bar
Association’s construction law review;

Julian Bailey is a solicitor at White & Case LLP, London, and currently
Chairman of the Society of Construction Law (UK).

© Stephen A Hess, Julian Bailey and the Society of Construction Law 2015

The views expressed by the authors in this paper are theirs alone, and do not
necessarily represent the views of the Society of Construction Law or the editors.
Neither the author, the Society, nor the editors can accept any liability in respect of
any use to which this paper or any information or views expressed in it may be put,
whether arising through negligence or otherwise.

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