In City of Houston v. R.F. Ball Constr. Co., 570 S.W.2d 75 (Tex. Civ. App.--Houston 14th Dist. 1978, writ ref'd n.r.e.), the City of Houston appealed a judgment in favor of its contractor arising from the construction of portions of the Houston Intercontinental Airport. Id. at 76.
Ball was scheduled to complete the project on April 30, 1967, but did not do so until June 9, 1969. During the project, Ball faced "several hundred 'Change Items' and between eight hundred and nine hundred 'Clarifications.'" Id.
The City paid direct costs associated with these changes, but did not pay indirect or impact costs associated with the changes. Id.
The types of indirect costs included disruption to the project and "general hindrance of efficient work which inevitably resulted from the changes." Id.
After a two-month trial, the jury awarded substantial damages to Ball and specifically found inter alia that:
(1) the number of changes was greater than foreseen by the parties;
(2) the unforeseen changes caused Ball's delay;
(3) such delay was not foreseen when the parties entered into the contract. Id.
Thus, on appeal, this court faced these jury findings and a no-damages-for-delay clause that provided, in pertinent part:
The Contractor shall receive no compensation for delays or hindrances to the work, except when direct and unavoidable extra cost to the Contractor is caused by the failure of the City to provide information or material, if any, which is to be furnished by the City. . . . If delay is caused by specific orders given by the Engineers to stop work, or by the performance of extra work, or by the failure of the City to provide material or necessary instructions for carrying on the work, then such delay will entitle the Contractor to an equivalent extension of time . . . .Id. at 77.
As a starting point, and citing to other jurisdictions, the Court acknowledged that "one of the exceptions to the application of a no-damages-for-delay provision is that a delay which was not intended or contemplated by the parties to be within the purview of the provision is not governed by it." Id.
Referring again to other jurisdictions, the Court also noted three additional generally recognized exceptions to enforcement of no-damages-for-delay clauses.
The additional exceptions we mentioned are: (1) delay resulting from fraud, misrepresentation, or other bad faith on the part of one seeking the benefit of the provision; (2) delay that has extended such an unreasonable length of time that the party delayed would have been justified in abandoning the contract; and (3) delay not within the specifically enumerated delays to which the no-damages-for-delay clause applies. R.F. Ball Constr. Co., 570 S.W.2d at 77 n.1.
With this background, the Court examined the intent of the parties arising from the specific language of the contract. Significantly, the Court specifically rejected Ball's line of cases that held that "if the delays or their cause were beyond the contemplation of the parties, then the no-damages-for-delay clause does not apply." Id. at 78 n.2 ("We disagree with such cases since they preclude operation of the clause in situations where the character of the delay was unforeseen, the precise sort of delays the clause is designed to cover.").
Ball obtained specific jury findings that the delay it occasioned fell directly within the common-law exception upon which it relied. Id. at 77-78.
Nonetheless, the Court determined that, because the no-damages-for-delay clause was unambiguous and did not limit its application to foreseen delays, Ball could not establish a right to compensation for the indirect costs of the delay. Id. at 78.
Finally, the Court specifically addressed the policy underlying some courts' rejection or restriction of no-damages-for-delay clauses: such provisions are very harsh. Id. Nevertheless, relying explicitly on the "instructive" language of the United States Supreme Court, the Court explained:
"Men who take $1,000,000 contracts for government buildings are neither unsophisticated nor careless. Inexperience and inattention are more likely to be found in other parties to such contracts than the contractors, and the presumption is obvious and strong that the men signing such a contract as we have here protected themselves against such delays as are complained of by the higher price exacted for the work." Id.
Thus, in R.F. Ball, we noted that the common-law exceptions to no-damages-for-delay provisions are "generally recognized" and, further, we analyzed one of the exceptions--that the "delay which was not intended or contemplated by the parties to be within the purview of the provision." Id. at 77.
However, we did not apply the exception because the contractor "had not established that the no-damages-for-delay clause was not intended to apply to unforeseen delays and hindrances and that it was only intended to apply to foreseeable ones." Id. at 78.