USA – NEW JERSEY Law and Practice Contributed by: David Freylikhman, Cory Mitchell Gray, David Jensen and Jody Saltzman, Greenberg Traurig LLP
tracts to include liquidated damages for contractor delay and, often, depending on the nature of the pro - ject and timing considerations, they may also include early completion bonuses. Any such bonuses tend to be based on economic terms and, while not uncommon, they are not an industry standard or norm. Delay events should be subject to prompt and timely notice with an obliga - tion to substantiate impact on the critical path of the work. Owners should consider the extent of weather events that may be assumed within the contractor’s construction schedule, and should clearly define force majeure events. Also to be considered are economic impacts from delays, including potential pricing escalation as a result of such delays. New Jersey law will recognise “no damage for delay” contract limitations (ie, an extension of time being to the exclusive remedy for excused delay) provided that statutes may prohibit such limitations in public works contracts to the extent that the delay is caused by a contracting entity’s bad faith, active interference or tortious conduct. Furthermore, New Jersey courts have permitted recovery for delay damages, notwithstanding any such contractual limitation, when: • the delay was of a type not contemplated by the parties; • the delay amounts to abandonment of the project or contract; or • the delay was caused by active interference or bad faith of the party seeking enforcement. It is therefore essential that any such provisions be care - fully drafted to reflect the intent of the parties. Relatedly, unpredictability may increase with respect to the treat - ment of delay claims and such provisions in the con - tinued wake of the COVID-19 pandemic and its ripple effects, now more generally referred to as “supply chain disruptions”; this includes, for example, the recent 27 March 2024 Key Bridge collapse in Baltimore, Maryland, which has resulted in a temporary port shutdown. Risk allocation, for both schedule and economic impacts, has gained more focus over the last several
years, with concerns related to supply chain disrup - tions and market volatilities continuing to be a point of emphasis. Parties should consider giving careful attention to bid clarifications and contract terms with respect to potential pricing holds and market fluctua - tion as a result of delays and independent of delays. Owners can receive compensation for delays, includ - ing liquidated damages, if provided for in the contract, though these recoveries will not resolve the issue of the project delays. Owners should consider additional monitoring and options, such as providing for clearly developed procurement schedules, early procurement and storage arrangements, and predetermining the availability of alternative supply sources and suitable substitute materials. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance A common form of additional security to guarantee a contractor’s performance is a performance bond, which is required for most public projects. In private projects, there may also be completion guarantees pro - vided from parent or related companies, depending on the nature of the transaction and the parties involved. Subcontractor default insurance programmes are also being implemented to mitigate project performance exposures for contractors. These programmes insure the contractor for losses associated with defaulting subcontractors. Owners should be mindful that such insurance programmes do not include an owner’s abil - ity to pursue insured claims, and that contractual pro - visions are needed between an owner and contractor/ policyholder to make certain that the intended bene - fits of such insurance programmes are being realised. 7.6 Liens or Encumbrances in the Event of Non-Payment Contractors and designers may file liens to encum - ber property in the event of non-payment pursuant to New Jersey liens law. Under New Jersey law, statu - tory liens for the prime contractor and subcontractors must generally be filed within 90 days of last providing labour or materials (120 days for residential projects) and the action to enforce the lien claim instituted with - in one year of the last provision of labour or materials to the project. The owner can remove a lien by posting
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