Argument that no-damages-for-delays exceptions apply for construction project fails
When an Illinois appellate court ruled in favor of Walsh Construction Co. recently, it reinforced the importance of negotiating a solid contract that leaves no issue unresolved. (Case No. 1-10-1226 / Illinois Appellate Court – First District)
Kubasiak, Fylstra, Thorpe & Rotunno, P.C.represented Walsh in connection with work the firm did on a multimillion-dollar redevelopment project at the Palmolive Building in downtown Chicago. Walsh was the general contractor on the project, which involved converting the building into residential and commercial condominiums. Walsh entered into a subcontract agreement with the plaintiff, Asset Recovery Contracting LLC, in which the plaintiff agreed to perform much of the interior demolition.
According to court documents, what was supposed to take Asset Recovery four months to accomplish turned into a year, with work never fully completed. These delays proved costly for the plaintiff, which incurred cost overruns and ultimately quit the job and closed its doors.
Furthermore, Asset Recovery claimed the project delays caused the company to go out of business because it wasn’t compensated for the extra work. The firm sued Walsh, citing Illinois-recognized exceptions to the no-damages-for-delays clauses included in its contract.
“Asset Recovery essentially tried to characterize their damages as extra work, which would have been compensable, claiming they were eligible for several million dollars,” KFTR shareholder Manny Placencia says.
According to court documents, Asset Recovery argued that these delay damages were exceptions to the firm’s contract with Walsh. Like the trial court before it, however, the appellate court found that these exceptions did not apply. Not only did Walsh receive a complete defense verdict at trial, but KFTR also won a counterclaim for Walsh for more than $300,000.
“The moral of the story here is that contracts matter,” Placencia says. “In this decision, the court turned to contractual provisions as its guide. If you draft your contract properly, this decision shows us that it will be enforced.”
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