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Bates & Rogers Constr. v. Greeley





Appeal from the Appellate Court for the Second District; heard in that court on appeal from the Circuit Court of Lake County, the Hon. William D. Block, Judge, presiding.


This action stems from a construction project known as the Gurnee Sewage Treatment Plant which was let in 1973 by the North Shore Sanitary District (the District). Plaintiff Bates and Rogers Construction Corporation (Bates & Rogers) successfully bid on certain divisions of the project and entered into a contract with the District under which it was the general contractor. The other plaintiffs, Economy Mechanical Industries, Inc. (Economy), and Goldberg and O'Brien Electric Company (Goldberg), were two of Bates & Rogers' subcontractors, but they had no contract with the District. Defendants here are the engineering firm of Greeley & Hansen and the individual partners of that firm (Greeley). They were retained by the District to serve as engineers on the project, but they did not execute a contract with any of the plaintiffs.

Plaintiffs initially filed a complaint in 1977 in the circuit court of Lake County against Greeley and the District alleging breach of implied warranty, breach of implied covenant, and intentional interference with a contractual relationship. They also claimed interest on retainages held by the District. The circuit court dismissed two counts of the complaint, and plaintiffs subsequently filed an amended complaint against the same defendants making substantially the same allegations, but also adding a charge of negligence against Greeley. The circuit court dismissed all counts of the amended complaint and the plaintiffs appealed. The appellate court upheld the circuit court's action with respect to the counts against the District (except for the retainages count), but reversed and remanded with respect to the allegations against Greeley. (92 Ill. App.3d 90.) Plaintiffs then filed a second amended complaint alleging negligence against Greeley and claiming retainages and interest from the District. Plaintiffs' dispute with the District was subsequently settled. The circuit court granted summary judgment for Greeley on the remaining negligence counts, and the appellate court affirmed. (128 Ill. App.3d 962.) We granted plaintiff's petition for leave to appeal (94 Ill.2d R. 315(a)).

In their second amended complaint, plaintiffs alleged that Greeley was negligent in designing electrical switchgear for the project, in failing to timely cure the design defects, in requiring a redesign of the switchgear after it had been ordered from the supplier, in failing to provide electrical service to the job site, and, more generally, in exercising its powers as engineer for the project. Plaintiffs claimed that Greeley's negligence caused them cost overruns, including additional labor costs, labor "addons," excessive supervision, winter protection of the work, and increased overhead, bond, insurance and interest costs, as well as lost profits. Defendants moved for summary judgment on the ground that plaintiffs were seeking purely economic losses which could not be recovered in a negligence action. The circuit court granted the motion, and the appellate court affirmed, holding that plaintiffs' losses were solely economic.

On this appeal, in addition to the economic-loss argument, defendants claim that plaintiffs seek "delay damages," and that under the contract between Bates & Rogers and the District plaintiffs waived their right to recover such damages. We read the contract to bar the damages claimed here and thus do not reach the economic-loss issue on which the appellate court based its holding.

Article 3.05 of the agreement between Bates & Rogers, the contractor, and the District provides in relevant part:

"The Contractor agrees to make no claim for damages for delay in the performance of this Contract occasioned by any act or omission to act of the District or any of its representatives, or because of any injunction which may be brought against the District or its representatives, and agrees that any such claim shall be fully compensated for by an extension of time to complete performance of the work as provided herein." (Emphasis added.)

Under the terms of the contract, the engineer, Greeley, is a "representative" of the District. Section 7 of the contract is entitled "POWERS OF THE DISTRICT'S REPRESENTATIVES." Immediately under the title appears "Article 7.01 The Engineer," followed by an exposition of the engineer's duties.

Plaintiffs do not suggest that a "no-damages-for-delay" clause, such as that included in article 3.05, is generally unenforceable; such an argument would, in any event, be unavailing, inasmuch as this court has consistently given effect to such clauses. (See Herlihy Mid-Continent Co. v. Sanitary District (1945), 390 Ill. 160; Ryan Co. v. Sanitary District (1945), 390 Ill. 173; Underground Construction Co. v. Sanitary District (1937), 367 Ill. 360.) Nor do plaintiffs contend that any exception to the general rule of enforceability of such clauses applies here. (See, e.g., Kalisch-Jarcho, Inc. v. City of New York (1983), 58 N.Y.2d 377, 448 N.E.2d 413, 461 N.Y.S.2d 746.) Plaintiffs' position is that the damages sought here do not constitute "delay damages." They are mistaken; delay damages are merely those damages caused by delay in the completion of a project. (See Herlihy Mid-Continent Co. v. Sanitary District (1945), 390 Ill. 160, 165.) Examination of the record in this case, as well as decisions in similar cases, reveals that the damages sought here in fact constitute delay damages.

Count I of the complaint, which relates to two of the contract divisions, states that, as a result of the negligent acts of Greeley, "no electrical service was furnished the work site until more than a year after the same was required, and plaintiffs were denied access to a material portion of the work, [and] the sequence of plaintiff's work was disrupted and burdened." As a "consequence of" these events, plaintiffs claimed that they suffered cost overruns and lost profits. Count II, which deals with two other contract divisions, sets forth essentially the same allegations.

A common sense reading of the complaint indicates that any damages the plaintiffs sustained, such as additional labor and supervision costs, increased overhead and lost profits, were caused by the delays in providing adequate electrical switchgear, which in turn resulted from defendants' alleged negligence. Plaintiffs, although disputing this interpretation, have offered no alternative explanation. Moreover, at the discovery stage in this proceeding, plaintiffs expressly characterized their damages as resulting from delays. In their response to defendants' demand for a bill of particulars, plaintiffs explained, with respect to the allegation that they were denied access to the work, that "the delay in furnishing the electrical power denied them access to a material portion of the work." (Emphasis added.) Similarly, as to the charge that Greeley's negligence forced them to work out of sequence, plaintiffs stated:

"The numerous changes and delays relating to the switchgear resulted in an extreme delay in the delivery of the switchgear to the project site, the result of which was to change the progress of the work done on the project from that which was most efficient and orderly to piecemeal and out of sequence. The delay in obtaining the electrical power had the same effect * * *." (Emphasis added.)

Finally, plaintiffs asserted that their progress had been burdened and winter protection required because of ...

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