Tully & Di Napoli, Inc. v. State, 43 N.Y.2d 731 (1977)

A “no-damages-for-delay” clause in a construction contract is generally enforceable, barring recovery of delay damages unless the delay was caused by the state’s gross negligence, deliberate misconduct, or breach of a fundamental obligation under the contract.

Summary

Tully & Di Napoli, Inc. contracted with New York State for highway reconstruction near the 1964 World’s Fair site. The project faced delays, and the contractor claimed damages exceeding seven million dollars, alleging the State contributed to the delays by forcing out-of-sequence work and improperly interfering with the schedule. The Court of Claims initially awarded the contractor significant damages, but the Appellate Division substantially reduced the award, finding the State not guilty of breach of contract. The Court of Appeals affirmed the Appellate Division’s decision, siding with their factual findings and implicitly upholding the enforceability of provisions allocating the risk of delay in complex construction projects.

Facts

Tully & Di Napoli contracted with the State to reconstruct highways in Queens County, including overpasses for the 1964 World’s Fair. The contract acknowledged potential delays and interferences. The contractor fell behind schedule, prompting the State to urge acceleration and increased workforce. The State advised contractors, including Tully & Di Napoli, that the work had to be completed by the World’s Fair opening in 1964 and that no extensions would be granted. The project was substantially completed by December 31, 1963, and fully accepted by the State on October 29, 1964, after four extensions totaling over 10 months.

Procedural History

The contractor filed a claim in the Court of Claims for over seven million dollars, alleging breach of contract. The Court of Claims found the State primarily responsible for the delays and awarded the contractor $2,888,026.60 in damages. The Appellate Division modified the judgment, reducing the award to $59,043.59, finding that the State did not cause undue delays and that some delays were attributable to the contractor’s own ineptness or were inherent in the project. The Court of Appeals affirmed the Appellate Division’s order.

Issue(s)

Whether the State breached its contract with the contractor by causing inordinate delays and improperly interfering with the contractor’s work, thus entitling the contractor to damages.

Holding

No, because the Appellate Division’s findings that the State did not cause undue delays and that some delays were attributable to the contractor’s own ineptness or were inherent in the complex project were factually supported.

Court’s Reasoning

The Court of Appeals deferred to the Appellate Division’s factual findings, which contradicted the Court of Claims’ conclusion that the State breached the contract. The Appellate Division found that some delays were due to the contractor’s inexperience or were inherent in the complex project. By affirming the Appellate Division, the Court of Appeals implicitly upheld the principle that parties can allocate the risk of delays in construction contracts, and that the State was not liable for delays not directly caused by its actions or inaction. The court noted that the dispute was essentially factual and the courts had resolved the issues differently, but the Court of Appeals sided with the findings of the Appellate Division based on the evidence presented. The decision reinforces the idea that in complex construction projects, contractors must bear the risk of certain types of delays, especially when the contract anticipates such potential issues. The case doesn’t explicitly discuss a “no-damages-for-delay” clause, but the outcome suggests its implicit presence and enforceability unless the delays are caused by the State’s gross negligence or willful misconduct. The court essentially found that the delays were within the scope of what the contractor should have anticipated when entering the contract. The absence of any dissenting or concurring opinions suggests unanimous agreement on the factual determination and the legal principles applied.