Contractors sometimes bill for delays regardless of who caused them, which can lead to disputes regarding payment obligations. However, not all delay charges are valid under Tennessee law. Understanding these limitations may help you identify improper charges and take appropriate action to protect your business.
What are valid reasons for delay charges?
Depending on the contract’s allocation of responsibilities and any required notice/documentation, a contractor may seek delay costs for delays caused by the other party, such as:
- Delaying approval of submittals or shop drawings
- Restricting site access required under the contract
- Not supplying materials required under the agreement
- Delaying required permits or inspections
- Missing deadlines for assigned work
- Responding late to project information requests needed for progress
When a contractor bills you for delays, you may want to compare the charges with your contract and the cause of the delay. While enforceable, a “no damage for delay” clause in Tennessee can be bypassed if the delay results from the owner’s bad faith, active interference, or is of such an unreasonable duration that it may be treated as beyond the parties’ contemplation.
Moreover, if the delay resulted from the contractor’s own actions or negligence, the charges may not be enforceable.
What happens if a contractor offsets payments for delays?
Payment offsets occur when contractors deduct delay charges from payments owed for completed subcontractor work. Under the Tennessee Prompt Pay Act, a party withholding payment may be required to give timely written notice of the amount withheld and the reason for withholding. If the withholding is not permitted by the contract or is not properly noticed, the withholding party may face statutory remedies such as interest and, in some cases, attorney’s fees
A payment offset may not be valid if:
- The contractor’s conduct or oversight caused the delays
- The contract does not authorize offsets for the stated reasons
- The contractor failed to follow the notice procedures required under the contract
- The contractor withheld payment without clearly identifying the basis for the deduction
If deductions are not supported by the contract terms, you may have grounds to challenge them. In some cases, withheld amounts may be recoverable.
How can you protect your business from unfair delay charges?
Unfair delay charges may arise when parties disagree about the cause of the delay. Clear, consistent documentation may help reduce that risk by reliably showing project progress. To maintain accurate project records, you can take steps such as:
- Logging daily job progress, including any interruptions or delays
- Documenting all instructions, approvals and change orders
- Tracking when contractual obligations are completed
- Noting any site access issues or coordination problems involving other trades
- Keeping written communication related to scheduling changes or delays
Unclear records often lead to disputes, which can result in a strained working relationship. Clear project records may help confirm whether a delay reflects broader coordination issues.
Responding to delay charges from contractors
Protecting your business means knowing when to stand firm against unfair billing practices. When you face delay charges that seem improper, you may benefit from legal guidance. A knowledgeable advocate can review your contract, assess the validity of the charges under Tennessee law and help you pursue appropriate remedies.