“[p]rices of commodities such as construction materials change over time and in accordance with market forces under many influences, including weather. The fact that Hurricane Katrina drove up the price of asphalt materials subsequent to the signing of the contract does not mean that delay damages were unforeseeable.”

As a result, the appeals court affirmed the trial court’s judgment for TCI.

This case demonstrates an important contract principle. When possible, courts read conflicting contract provisions to give meaning to the entire contract and each individual clause. Here, the court found contract clauses providing for delay damages and changed conditions overrode the city’s “no liability” clause. As the trial court noted, the city could have drafted a force majeure clause and insulated itself from damages based upon an act of God, but did not do so. However, with slightly different facts the court could have ruled the other way. In general, contracting parties need to be aware of risk-shifting mechanisms within a contract, including delay and escalation clauses relating to the increased price of materials. In the absence of such contract provisions, the question of who bears the risk of loss can be uncertain.

Brian Morrow is a partner in Newmeyer & Dillion LLP, a law firm in California. He is a licensed California Civil Engineer, and specializes in the field of construction law, including road and heavy construction. Contact him at brian.morrow@ndlf.com