Plaintiff Buckley & Co., Inc. and Schiavone Construction Co., Inc. (Buckley/Schiavone), a joint venture, bring this action pursuant to the New Jersey Contractual Liability Act, N.J.S.A. 59:13-1 et seq. , against the State of New Jersey, through the Commissioner of the Department of Transportation (Department) to recover, for itself and certain of its subcontractors, sums claimed to be due arising out of the performance of a construction contract entered into by the parties on March 28, 1967 for a project known as Route 78, Section 5U.
I. Nature of the Action and Questions Presented
The project involved construction of a section of Interstate Route 78 in the City of Newark. Described by the Department
as being "one of the largest and one of the most complex projects ever entered into" by it, the project centered on the confluence of U.S. Routes 1 and 9, the New Jersey Turnpike, Newark Airport and the access roads to Port Newark. The contract included road and bridge construction together with a variety of related utility, drainage, electrical and similar work. The complexity of the project lay not in the engineering or construction work itself, but rather in the planning for, and the assuring of, the continued flow of traffic in, around and through the site during construction. The contract, awarded to Buckley/Schiavone for $10,836,141.90, contemplated that the work would consume 30 months, and fixed a completion date of November 1, 1969. Various change orders entered into between the parties during and after construction extended the completion date a total of 477 days to February 21, 1971; the work was not completed until May 19, 1971, or 564 days after the scheduled completion date. The claims made here by Buckley/Schiavone on its own behalf all arise out of that delay.
Buckley/Schiavone first seeks compensation for ten different kinds of "overhead" expenses, that is, costs of equipment and personnel incurred as a result of the extended life of the project. "Overhead" equipment and personnel -- including such equipment as field office and superintendent's vehicles and such personnel as job superintendents and other supervisory salaried employees assigned to the job -- were not separate bid items but were allocated among the various bid items at costs based upon the anticipated life of the project. Each day that the project life was extended meant, according to Buckley/Schiavone, the continuation of those costs without compensation under the contract; such costs are distinguished by Buckley/Schiavone from production costs which are incurred only as and to the extent work proceeds.
Buckley/Schiavone further seeks recovery of additional wages paid to employees because of wage escalations which became effective after the November 1, 1969 scheduled completion
date. Finally, it seeks recovery of $26,100 retained by the Department pursuant to the contract as "liquidated damages" at $300 a day for the failure of Buckley/Schiavone to complete the project until 87 days after the completion date as extended by the change orders referred to above.
In defense of these claims the Department contends that certain of the delays were caused by Buckley/Schiavone itself; that the various construction problems claimed by Buckley/Schiavone did not in fact cause the delays claimed, and that all of the claims for additional costs are barred by a variety of contract provisions commonly known as "no damage for delay" clauses.
The claims made by Buckley/Schiavone on behalf of its subcontractors are of a variety of kinds, including claims for losses sustained by the subcontractors from the delays. Discussion of those claims is deferred to Part IV of this opinion.
II. The Project Delays: Findings of Fact
In order to provide for continued traffic movement to and through the various roads and facilities affected by the construction, the plans as prepared by the Department fixed a highly intricate staging procedure. The construction was fractioned into a total of 22 stages, designated Stages 1-A to 1-H, 2-A to 2-F, 3-A and 3-B, and 4-A to 4-D. For each stage the plans indicated (1) the construction work which was to proceed, (2) the portions of existing or newly constructed roadways which were to be open to traffic, and (3) the routing of traffic to and from the various roads and facilities. Construction could not proceed from one stage to another unless roadway areas needed for the planned traffic flow were available. However, the plans did not require that all work follow a rigid sequence but rather showed that certain work could be done in more than one of the stages and that certain stages could be worked, at least in part, concurrently.
Some of the work, then, was critical to the progress of the job in that delay in its completion would delay commencement of the next phase and of the project as a whole, but not all of the work had that same potential effect. The factual disputes between the parties are largely as to what problems arose during the progress of the several stages and what delays, if any, can be attributed to each such problem.
To support its explanation of the causes of the 564-day delay, Buckley/Schiavone introduced its concept of the "critical path." That term is one of accepted though recent use in the construction industry. Used in the planning and bidding of projects, it designates those construction items which must be completed sequentially, indicates the maximum period of time required for each, and thus discloses the total amount of time required to complete the entire project. Although the present contract was neither prepared nor bid in terms of critical path analysis, Buckley/Schiavone at trial employed such an analysis to argue in retrospect where and why delays occurred.
The Department does not question that critical path analysis can be used to such an end, and in fact presented its own concept of the critical path. However, the parties dispute both what occurred during the course of construction and what elements of the construction were on the critical path. These disputes lead to the divergent explanations given by the parties for the delay in project completion. Their conflicting reconstructions are best evaluated by examination of the various causes of delay urged by the parties.
[The court here reviewed the evidence and reached the following conclusions as to project delays:
A. Delays in Granting Access
Relocation of a United States Weather Bureau ceilometer delayed demolition of a fire house from
May 16 to May 31, 1967, and thereby delayed the project completion by 15 days.
A portion of the right-of-way known as the Stulman property, as to which the contract described an anticipated vacation date of July 1, 1967, was not available until August 1, 1967, causing a 31-day delay in project completion.
(3) The Mannkraft Property
A second tract, known as the Mannkraft property but not referred to in the contract, was not available until August 2, 1967. The delay from the May 16, 1967 construction commencement date to August 2, 1967 caused a delay in the project of 79 days; this delay overlapped in part those just described.
B. Delays Resulting from Utility Work
(1) Port Street Water Line
Revision of staging plans for construction of the Port Street water line to accommodate Port Authority traffic requirements and City of Newark water supply requirements caused delay between June 15 and October 22, 1967, resulting in 129 days of project delay; this delay also overlapped in part the delays resulting from lack of access to the fire house, the Stulman property and the Mannkraft property, described above.
(2) Frontage Road Water Main
Revision of plans for the Frontage Road water main caused delay from June 14, 1967 to January 16, 1968, and the decision of the City of Newark to extend the water main at its own expense caused a further delay from March 25 to April 22, 1968. Project completion was delayed for these reasons for 89 days and 28 days, respectively.
C. Delays Resulting from Plan Errors
Errors, omissions and inadequacies in the plans prepared on behalf of the Department caused a variety
of delays throughout the course of the project, resulting in project delays of 190 days.
D. Miscellaneous Claims of Further Delays
The 87 days of delay for which no extension of time was granted by the Department resulted from action and inaction by both parties as well as from conditions over which neither had control, but the record provides no basis to ascribe particular portions of that delay to particular causes.]
III. Buckley/Schiavone Claims: Conclusions of Law
The parties agree that additional costs resulted to Buckley/Schiavone by reason of the delays in project completion, and they have reduced those costs to stipulated per diem amounts for each of the various kinds of costs. They are in dispute, however, as to whether any or all of those additional costs are recoverable by Buckley/Schiavone.
In defense the Department relies principally on a variety of "no damage for delay" clauses in the contract. The general no-damage clause is Article 1.7.4 of the Standard Specifications made part of the contract:
If for any reason beyond the control of the Contractor other than as provided for in Art. 1.7.3 [not here relied upon] the work be delayed, the Contractor may be granted an extension of time as provided in Art. 1.7.8, but he shall have no right to nor shall he make any claim whatsoever for damages or additional compensation by reason of the delay.
Other more specific no-damage clauses of the contract are set forth below as they become relevant.
The no-damage provisions must be construed and applied in accordance with the principles set forth in Ace Stone, Inc. v. Wayne Tp. , 47 N.J. 431 (1966), and the earlier decisions in A. Kaplen & Son, Ltd. v. Passaic Housing Authority , 42 N.J. Super. 230 (App. Div. 1956); Gherardi v. Trenton Bd. of Educa. , 53 N.J. Super. 349 (App. Div. 1958). See also Franklin Contracting Co. v. State of New Jersey , 134 N.J. Super. 198 (Law Div. 1975).
In Ace Stone the Township of Wayne contracted with Ace Stone, Inc. as general contractor for a sewer line project. At a job meeting held prior to the execution of the contract the township engineer advised Ace Stone that it would be required to adhere to the 80-day completion date fixed by the proposed contract and directed that construction commence concurrently at three separate locations; he informed Ace Stone that all necessary easements had been acquired.
The contract was thereafter signed and Ace Stone was instructed to proceed. It organized crews and equipment and moved onto the construction site, whereupon it learned that only one of the three sites was available because the township had not in fact acquired all necessary rights of way or easements. As a result the Supreme Court found that "plaintiff was unable to conduct its operations in an orderly, continuous and economic fashion, work stoppages ensued because of the lack of easements, and the project had to be carried on through the winter months. * * *"
Following the completion of the work Ace Stone sued to recover its additional costs resulting from these delays. The trial judge granted the Township's motion for summary judgment based on the contract's no-damage clause and related provisions, as well as on the earlier cases of Kaplen and Gherardi. The Appellate Division affirmed, 89 N.J. Super. 482 (App. Div. 1965).
The Supreme Court, through Justice Jacobs, reversed and remanded the matter to the trial court for a plenary hearing. In his comprehensive discussion of no-damage clauses in general and the earlier New Jersey precedents Justice Jacobs noted that the legality of no-damage clauses "is acknowledged"; that such a clause is "generally construed strictly against its draftsman," and that "special exceptions are often read into it. * * *" 47 N.J. at 434. After discussing a number of factually apposite cases from other jurisdictions projecting such "special exceptions", Justice Jacobs concluded:
Where parties enter into a construction contract with a customary no-damage clause they clearly contemplate, as Judge Goldmann pointed out in Gherardi, supra , that the contractor himself will bear the risks of the 'ordinary and usual types of delay' incident to the progress and completion of the work * * * And provisions in any given contract may disclose with clarity that the parties contemplate that the contractor will even bear the risks incident to highly crucial delays such as those resulting from the public agency's failure to have the site ready. [47 N.J. at 437-438]
Justice Jacobs went on to note that the no-damage clause of the contract before the court was broad but nonspecific in its language and that parol evidence
Accordingly, the matter was remanded to the Law Division for a full hearing to determine
The precedents, both within and without New Jersey, are collected in Annotation, "Validity, construction and application of no damage clause with respect to delay and construction contract," 10 A.L.R. 2d 801 (1950). Although decisions in other cases are of limited utility since they largely turn on "the particular circumstances presented" (cf. Nix, Inc. v. City of Columbus , 111 Ohio App. 133, 171 N.E. 2d 197, 201-202 (Ct. App. 1959)), attempts have been made to categorize the cases. In Kaplen, supra , 42 N.J. Super. 230, for instance, Judge Conford listed certain "exceptional situations" in which a no-damage clause would not bar recovery:
* * * as, for example, where the delay by the public body was of a kind not contemplated by the parties, Sheehan v. City of Pittsburg , 213 Pa. 133, 62 A. 642 (Sup. Ct. 1905); where the delay was deemed to amount to an abandonment of the project, People ex rel. Wells & Newton Co. of New York v. Craig , 232 N.Y. 125, 133 N.E. 419 (Ct. App. 1921); or where the delay was caused by the active interference or bad faith of the public agency, American Bridge Co. v. State of New York , 245 App. Div. 535, 283 N.Y.S. 577 (App. Div. 1935). [at 234, 235]
Judge Goldmann in Gherardi, supra , 53 N.J. Super. 349, also discussed the applicability of a no-damage clause in terms of the various "exceptions" stated in prior cases, and such has been the approach of many cases in other jurisdictions. See, e.g., F.D. Rich Co. v. Wilmington Housing Auth. , 392 F.2d 841, 843 (3 Cir. 1968); Peter Kiewit Sons' Co. v. Iowa Southern Utilities Co. , 355 F. Supp. 376, 397 (S.D. Iowa 1973); Grant Construction Co. v. Burns , 92 Idaho 408, 443 P. 2d 1005, 1012 (Sup. Ct. 1968).
Both Kaplen and Gherardi suggest that analyzing particular fact patterns in terms of such "exceptions" can be misleading, and Ace Stone appears to have appropriately rejected reliance on such labels and instead directed a single inquiry into the intention of the parties. Concepts such as "interference" or "bad faith" of the contractee, or "abandonment" of the contract, thus are simply considerations which bear on that ultimate determination.
In resolving that question, it must be kept in mind that, in the absence of contractual provision to the contrary, a contractor is generally held to be entitled to damages for delay resulting from a default of the contractee in the performance of his obligations under the contract. See, generally, Annotation "Right of building or construction contractor to recover damages resulting from delay caused by default of contractee," 115 A.L.R. 65 (1938). As Ace Stone suggests, a no-damage provision ought not be construed as exculpating a contractee from that liability unless the intention to do so is clear; Justice Jacobs there quoted
(47 N.J. at 436) with approval the following language from Pitt Constr. Co. v. City of Dayton , 237 F. 305 (6 Cir. 1916):
For a cognate principle of contractual interpretation, see Cozzi v. Owens Corning Fiber Glass Corp. , 63 N.J. ...