December 11, 2020 ARTICLE

Is “Unfettered Access” to a Project Site an Implicit Right of the Contractor in Every Construction Contract?

Olivia Polston

In almost every construction contract, the Owner has an implied duty or obligation to not interfere with or delay the Contractor’s performance in their scope of work on a construction project. However, courts have had to consider whether that implied duty also includes an obligation that the Owner must supply the Contractor with complete and unfettered physical access to the construction project site. To that end, various courts have held that every “contract for the construction of a building or highway ‘implies [ ] an essential condition that a site shall be furnished upon which the structure may be erected.’” Therefore, once a notice to proceed has been issued or the contract for construction has officially been commenced, the contractor should have complete and unfettered physical access to the project site so as to allow him to timely begin performing his scope of work.

 

Common duties of the Owner which fall under this obligation to provide unfettered access include failure to secure necessary right-of-way easements or utility relocations and failure to ensure timely completion of preceding work by other contractors on the project site. When the Owner fails to fulfil these duties and the project is delayed, disrupted or hindered because the contractor cannot physically access all or parts of the site to perform its scope of work or is unable to sequence its work as expected, the Owner is thereby liable for any damages resulting therefrom. Therefore, in Derby, the court found that the contractor had an actionable complaint for delay damages because the State Department of Highways had failed to provide unfettered access to a construction site by not obtaining the necessary right-of-way easements from utility companies prior to issuing its “notice to proceed,” thereby delaying the contractor’s performance for ten months.

Under these situations, contractors will often incur damages resulting from “increased payroll and other labor costs, increased material costs, costs resulting from the loss of efficiency of the use of equipment, increased costs for extended bonding and insurance coverage, and other [ ] items that can reasonably be attributed to the performance of the work that was delayed.” Additionally, one common type of damage which contractors incur as a result of delay on their performance is increased field and office overhead, which includes expenses for “office personnel costs, utility bills, office rent, and vehicles and machinery not directly charged to a particular job” among other things.

 Owners often try to avoid liability for these types of delay damages which result from a contractor’s lack of complete physical access to a project site by including site inspection clauses which provide that the contractor has conducted a reasonable inspection of the project site prior to entering into the construction contract with the Owner. However, reliance on this clause is misplaced because its intention is to protect contractors from the risk of unpredictable site and building conditions after doing a reasonable visual investigation of the project site. This is a distinct duty from ensuring that the project site is actually physically available for the contractor to commence work on, which as the U.S. Supreme Court has held, is an obligation that implicitly rests with the Owner.

Additionally, Owners often incorporate “no damage for delay” clauses which leave contractors with the sole remedy of an extension of time on their scope of work for owner-caused-delays on the project. These clauses are intended to relieve Owners of financial liability for delay damages resulting from their misconduct, and traditionally, many jurisdictions found these clauses to be enforceable.  These clauses typically include language which states in some fashion that:

[T]o the fullest extent permitted by law, Owner [ ] and their agents and employees shall not be held responsible for any loss or damage sustained by Contractor, or additional costs incurred by Contractor, through delay caused by Owner or [ ], or their agents or employees, or any other Contractor or Subcontractor, or by abnormal weather conditions, or by any other cause, and Contractor agrees that the sole right and remedy therefor shall be an extension of time.

In Broadway Maintenance Corp., the Supreme Court of New Jersey found that these exculpatory clauses were part of an economic package which contractors were freely able to choose to accept or deny and if accepted would reflect the increased risks in their proposed contract price. Recently, however, there has been a trend in which several jurisdictions have enacted statutes limiting the enforceability of “no damage for delay” clauses. However, dependent on the jurisdiction, the statutes may vary on what type of contracts “no damage for delay” clauses are unenforceable in. For example, in Colorado such clauses which relinquish the contractor’s right to recovery of delay damages which result from the fault of the Owner are only unenforceable in public construction contracts. Whereas, in Kentucky “no damage for delay” clauses which relinquish the contractor’s right to damages resulting from the delay of the Owner are unenforceable in every type of construction contract .

The safest option enabling an Owner to dodge liability for delay damages resulting from their failure to provide complete and unfettered physical access to a construction site is to expressly shift that burden to the contractor in the prime contract. As such, in Thomas & Assocs., Inc., the Court of Appeals of Tennessee held that it was the contractor’s duty to coordinate the  relocation of utility lines on a construction project site despite recognizing a Tennessee statute which placed that responsibility on the owner because the contract expressly stated, “prior to submitting his bid, the contractor will be solely responsible for contacting owners of all affected utilities in order to determine the extent to which utility relocations and/or adjustment will impact the schedule of work for the project.” Thus, the owner was not responsible for coordinating the utility lines’ relocation because that responsibility was expressly shifted to the contractor in the contract.” On the other hand, it is important to recognize that contract provisions which obligate the contractor to obtain all necessary permits, licenses, and fees, or require that the contractor comply with all rules, ordinances, regulations, and orders of public authority are not always sufficient to explicitly shift the Owner’s burden of furnishing unfettered access to the construction site to the contractor. Thus, in Statler Mfg., Inc., the Missouri Court of Appeals found that two such contract provisions which obligated the Contractor to obtain necessary licenses and to follow certain laws was not sufficient to shift the Owner’s obligation of obtaining the release of an easement to the contractor, so that the contractor could have access to the project site and timely perform his scope of work.

In conclusion, in every construction contract, contractors have the right to be provided with complete and unfettered physical access to the project site. Thus, it is best practice for an Owner to ensure that their contractor that access by no later than the commencement of the contract. Otherwise, the Owner might be found to have breached its implied obligation to not interfere with the contractor’s  work  and thus may be liable for delay damages incurred as a result of this breach. Although traditionally, Owners were able to avoid this liability by incorporating “no damage for delay clauses” into their contracts, many jurisdictions have begun to move away from that trend and have enacted legislation which renders such clauses unenforceable. Therefore, if an Owner wants to avoid this obligation and potential liability, it will have to clearly draft the contract to explicitly shift the burden of ensuring complete and unfettered physical access of the project site to the contractor.

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Olivia Polston

JD Candidate, University of Louisville, KY