Archive for January 2013

The Illinois Appellate Court Enforces ‘No Damages for Delay’ Clause Against Subcontractor

January 17, 2013

In a recent decision, the Illinois Appellate Court held that a subcontractor was barred from invoking exceptions to a “no damages for delay” clause because the project delays were deemed reasonably foreseeable, and the subcontractor had notice of the schedule changes and chose not to negotiate different terms.  Furthermore, the parole evidence rule did not bar the court from examining extrinsic evidence in interpreting the subcontract agreement because evidence of delays and schedule changes did not vary or modify the subcontract’s terms, but rather clarified an ambiguity in the contract.

In Asset Recovery Contracting, L.L.C. v. Walsh Constr. Co. of Ill., No. 1-10-1226 (Ill. App. Ct. Nov. 1, 2012), Asset Recovery Contracting (ARC), a subcontractor hired to perform demolition work for the multimillion dollar redevelopment of the Palmolive Building at 919 North Michigan Avenue, Chicago, appealed, among other things, the trial court’s findings that (1) ARC could not recover damages for delays pursuant to the “no damages for delay” clause, and (2) the court could consider extrinsic documents and circumstances in interpreting the subcontract agreement.

ARC’s subcontract with Walsh contained a “no damage for delay” clause.  Illinois courts will enforce such clauses but also recognize the following exceptions to such clauses: delay caused by ‘bad faith,’ delay ‘not within contemplation of the parties,’ delay of ‘unreasonable duration,’ and delay attributable to ‘inexcusable ignorance or incompetence of engineer.’  ARC argued that the trial court erred in failing to apply two exceptions:  (1) the delays were not within contemplation of the parties, and (2) the delays were of unreasonable duration.

The Appellate Court applied the reasonable foreseeability test and determined the delays were reasonably foreseeable.  The various delays were well known to ARC prior to ARC’s execution of the subcontract.

The second exception – delay was of ‘unreasonable duration’ – also did not apply.  The schedule changes were found to be a reasonable delay because ARC had notice of the schedule changes, as well as an opportunity to negotiate different terms, but failed to do so.  The court also considered that ARC, by its conduct in continuing to perform and submitting requests for increased costs, waived any argument that the delays were of unreasonable duration.  The court noted that the mere length of the delay, by itself, does not establish unreasonable delay.

ARC’s second claim was that the trial court erred in considering extrinsic evidence in:  (1) interpreting the operative date of the subcontract agreement; (2) the schedule for performance of ARC’s work under the agreement, and (3) concluding that ARC considered the changes to the schedule reasonable.  The parole evidence rule precludes evidence of understandings not reflected in the contract, reached before or at the time of its execution, that would vary or modify its terms.

The trial court did err in considering extrinsic evidence in its interpretation of the operative date.  The subcontract clearly stated at the top face of the subcontract agreement, “Date of Agreement:  September 12, 2003.”  The subcontract also contained a certification clause.  The date on the contract of September 12, 2003 was one of the terms of the contract which ARC was certifying it was aware of.  The general contractor also certified this was the effective date of the contract when it executed the subcontract on May 4, 2004.  Thus, any parole evidence regarding the effective date of the contract should not have been considered.

The trial court’s decision to review extrinsic evidence to assess the schedule for performance of ARC’s work and ARC’s consideration of schedule changes was not in error.  The contract contained all essential terms and an integration clause.  The subcontract provisions specifically provided for changes to the work schedule.  The contract was, however, facially ambiguous regarding whether the schedule was firm.  To resolve this ambiguity, the court examined extrinsic evidence regarding whether ARC considered the changes reasonable ‘at the time the contract was made.’  At the time of ARC’s execution of the contract, ARC knew of all the delays, yet did not request a modification to the subcontract allowing for delay damages.  Instead, ARC executed the subcontract and proceeded with its work thereunder.  This extrinsic evidence did not vary or modify the subcontract’s terms.  Thus, the parole evidence rule did not apply to exclude such evidence under the subcontract.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.

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Repair Or Replacement Does Not Constitute An Improvement To Real Property

January 17, 2013

The Illinois Appellate Court recently confirmed that mere replacement or repair to an improvement to real property does not trigger anew the 10-year statute of repose for construction claims in Illinois.  In Schott v. Halloran Construction Co., Inc., a police officer was injured while on patrol when he fell off a retaining wall which did not have a guard rail.  The officer filed a complaint against the contractor that originally installed the retaining wall.  The officer’s fall occurred in 2001 and the retaining wall was originally installed in 1990.

During the course of the trial court proceedings, the contractor repeatedly raised the statute of repose as a defense and that defense was repeatedly rejected by the trial court.  Ultimately, the case was tried to a jury and the jury entered a verdict in favor of the injured police officer.  On appeal, the Fifth District reversed the decision of the trial court finding that the 10-year statute of repose applied to bar the plaintiff’s claims.

The plaintiff acknowledged that the original retaining wall was built in 1990, but argued that a portion of the retaining wall was rebuilt or repaired in 1994.  That repair was necessitated by the washout of a portion of the retaining wall due to a heavy rainfall.  The repair work simply restored the retaining wall to the condition it was in before the washout from the rainfall.  Nonetheless, the plaintiff insisted that the statute of repose ran anew starting in 1994, thus making the plaintiff’s claim timely.  An additional important fact was that the police officer fell from a portion of the retaining wall that was not the subject of the 1994 repair.

The appellate court observed that the definition of improvement in the Illinois construction statute of repose, 735 ILCS 5/13-214(b), includes “a valuable addition made to the property (usually real estate) or an amelioration in its condition, amounting to more than mere repairs or replacement …”.  Improvements fall within the purview of the construction statute of repose; repairs or replacements do not.  The appellate court found that because the 1994 repairs simply restored the retaining wall to its original condition and therefore did not add value to the property, the 1994 work did not constitute an improvement to real property.  As a result, the construction statute of repose was not retriggered in 1994, thus making the plaintiff’s claims untimely.  The appellate court also held that the statute of repose barred the plaintiff’s claim because the portion of the wall where the plaintiff fell from was in fact the very same improvement – without any repair or rebuild – that was installed in 1990.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.

Kendall Woods Joins Dan Brennan and Ty Laurie in Super Lawyers Publication

January 9, 2013

The team at Laurie & Brennan would like to congratulate Ms. Woods for being recognized as a “2013 Rising Star” for Super Lawyers.  Kendall concentrates her practice in construction and commercial litigation at both the trial and appellate level, and after law school, she worked as a staff attorney for the Illinois Supreme Court.  Partners Dan Brennan and Ty Laurie were also acknowledged as Super Lawyers for attaining high peer recognition and achievement in construction law.

Super Lawyers is a rating service of outstanding lawyers from more than seventy practice areas who have attained a high-degree of peer recognition and professional achievement.  The selection process is multi-phased and includes independent research, peer nominations and peer evaluations.

Super Lawyers “Rising Stars” honors attorneys who are forty or under, or who have been practicing for ten years or less.  Lawyers are nominated by attorneys who have personally observed them in action.  In addition to the general survey, the attorney-led research team reviews the credentials of potential candidates and assigns points based on a set of defined evaluation criteria.  No more than 2.5% of lawyers in the state are named to the list.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only. The purpose of the Blog is not to provide specific legal advice on any particular matter. By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.


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