NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7945A
SPONSOR: Kim TITLE OF BILL: An act to amend the state finance law, in relation to
damages to contracts occasioned by delay
PURPOSE OR GENERAL IDEA OF BILL:
Requires public contracts to include a clause authorizing contractors to
recover damages for delay for itself as well as on behalf of subcontrac-
tors or materialmen.
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 of this bill amends the State Finance Law by adding a new
Section 138-b which would provide that all public works contracts shall
contain a clause which allows a contractor, subcontractor, or material-
man to make claim for additional costs due to excusable delays which are
the result of actions or omissions by a public owner or any of its
representatives. The act or omission must be within the scope of their
responsibility or control.
Section 2 of the bill sets forth the effective date.
JUSTIFICATION:
Current case law in New York State follows KALISCH-JARCHO, INC. V. CITY
OF NEW YORK (578 NY 2nd 377) and subsequent court decisions, which allow
a contractor to recover damages for such delay caused where the owner
acted in bad faith and with deliberate intent, along with several other
limited exceptions. In fact, the burden of proof to establish bad faith
and deliberate intent makes it unlikely that contractors would be able
to recover damages for delay.
Several public agencies, most notably NYS Office of General Services
(OGS) and the federal government, have already recognized the unfairness
of this restriction and have provided in their public contracts for a
more equitable allowance for damages for delays resulting from public
agency action.
By tracking current OGS contract language, this bill would reinstate the
pre-Kalisch-Jarcho standard making "no damages for delay" clauses unen-
forceable where the contractor has suffered a delay for an unreasonable
time and such delay is the fault or responsibility of the project owner.
It would require all public contracts to include a clause authorizing
contractors to recover damages for delay under such circumstances, which
is both fair and equitable, and recognized as such by one of the largest
agencies in New York State.
Seventeen states allow for the specific recovery of damages related to
expenses incurred by the contractor for a delay for which the state
governmental unit is responsible, which was unreasonable under the
circumstances, and which was not within the contemplation of the parties
to the contract. Many more states recognize a common law right to
damages for delay. New York should not be an exception to this trend.
In 1998, Governor Pataki vetoed S.6711-B, a more generalized proposal to
achieve the same relief sought by this legislation. In his veto message
(see Veto Message 1404), Governor Pataki stated that he was sympathetic
to the concept and that the recognized that policy of OGS was directed
to address the needs sought in the legislation, but there were technical
problems in the bill draft. This bill addresses the technical issues
raised by Governor Pataki and clarifies liability for damages where
actions or omissions of a public agency are directly associated with the
damages incurred by a covered contractor.
PRIOR LEGISLATIVE HISTORY:
New bill.
FISCAL IMPLICATIONS:
To be determined.
EFFECTIVE DATE:
This act shall take effect 180 days after enactment.
