Source: https://case-law.vlex.com/vid/551-f-2d-1026-596589698
Timestamp: 2019-04-19 16:21:31+00:00

Document:
Party Name: E. C. ERNST, INC., Plaintiff-Appellant Appellee, v. MANHATTAN CONSTRUCTION COMPANY OF TEXAS, Providence Hospital, Fairbanks-Morse, Inc., Charles H. McCauley Associates, Inc., Defendants-Appellees Appellants.
Hospital, Fairbanks-Morse, Inc., Charles H.
Edward S. Sledge, Mobile, Ala., Glower W. Jones, Atlanta, Ga., Arthur Friedman, New York City, for E. C. Ernst, Inc.
Willis C. Darby, Jr., Mobile, Ala., for Providence Hospital.
Louis E. Braswell, Mobile, Ala., for Fairbanks-Morse, Inc.
Clarence L. McDorman, Jr., Birmingham, Ala., for Charles H. McCauley Associates, Inc.
David M. Thornton, Tulsa, Okl., for Manhattan Const. Co.
Before GODBOLD, McCREE [*] and TJOFLAT, Circuit Judges.
This complex diversity case arises from a series of disputes concerning difficulties encountered during construction and renovation of a hospital at Mobile, Alabama. The parties are Ernst, an electrical subcontractor on the project; Providence Hospital, the owner; McCauley, the architect; Manhattan, the general contractor; and Fairbanks-Morse, Ernst's electrical supplier. After more than four years of proceedings and a 40-day bench trial, the district court entered its lengthy opinion, 387 F.Supp. 1001 (S.D.Ala.1974).
Ernst's principal ground for appeal is the refusal of the district court to award it damages for delays on the job caused by the other four parties' breaches of their respective duties to Ernst. These other parties have paid Providence for delays. But they have not paid damages claimed by Ernst.
the activities on the jobsite violated paragraph 21(c) of the general conditions of its contract with Providence, that Manhattan assumed the responsibility for delays by other subcontractors (as well as its own) under paragraph 21(b) of the general conditions, that it failed to schedule double shifts once delay had set in and thereby breached the "general requirements" of that contract, and that it failed to schedule work properly, also in violation of the general requirements.
An extension of time for the completion of this contract is hereby granted to (Ernst) for a period equal to any delay caused by MANHATTAN CONSTRUCTION COMPANY. Such extension of time shall be in lieu of and in full satisfaction of any and all claims whatsoever of (Ernst) against the MANHATTAN CONSTRUCTION COMPANY.
This is a reformulation of the common "no damage" clause in construction contracts whereby one party contractually limits its own liability for delay damages. Although the Alabama 1 courts have not ruled on the validity of such provisions, their validity is now well established. See generally Peter Kiewit Sons' Co. v. Iowa Southern Utilities Co., 355 F.Supp. 376, 396-401 (S.D.Iowa 1973). 2 Given their harsh effect, courts will strictly construe such provisions but generally enforce them absent delay (1) not contemplated by the parties under the provision, (2) amounting to an abandonment of the contract, (3) caused by bad faith, or (4) amounting to active interference. Id. at 397. Ernst claims none of these exceptions, and the delay by Manhattan does not fit any of them.
Manhattan's failure to grant Ernst a time extension was not the breach of a condition precedent to Manhattan's invoking the "no damage" clause. The clause makes no reference to any such requirement for formally granting an extension; the language "an extension of time . . . is hereby granted" seems to suggest the opposite. The purpose for such a provision would be to assure Ernst that Manhattan (or those upstream from Manhattan) would not sue Ernst for Manhattan's own delays. No one in this case has charged Ernst for those delays; Manhattan has already been charged for them under the liquidated damage formula.
Ernst also claims that Manhattan's failure to comply with a separate contractual provision operates to negate the effect of the "no damage" clause. This separate clause appears to be an agreement by Manhattan to assert Ernst's claims for delay damage caused by Providence or any subcontractor, to the extent permissible under Manhattan's contracts with those parties. We are not persuaded that the consequences of breaching this obligation should include a waiver of the "no damage" defense, which concerns damages for Manhattan's delays.
violation of federal regulations incorporated into the contract (291/2 days). 3 Ernst seeks to parlay these findings into a recovery for itself against Providence, pointing out that its "follow-on" electrical work was inevitably delayed to its damage by these same actions.
In order to establish that these actions breached some duty to it established by Alabama law, see Twine v. Liberty National Life Insurance Co., 294 Ala. 43, 311 So.2d 299, 302 (1975), Ernst asserts a third-party beneficiary theory, citing cases imposing owner-general contractor duties and general contractor-subcontractor duties. None of these cases imposes a theory of owner-subcontractor duty. We turn elsewhere in the law of Alabama to determine the validity of third-party beneficiary liability on the facts of this case.
The Alabama courts have made it clear that one not a party to a contract cannot generally sue for its breach. Twine, supra; Watson v. Mills, 275 Ala. 176, 153 So.2d 612 (1963); Land Title Guaranty Co. v. Lynchburg Foundry Co., 80 So. 142 (Ala.App.1918). The Alabama Supreme Court has indicated that the well-established judge-made requirement of vertical privity for manufacturers' liability should not be overturned except by legislative act. Compare Harnischfeger Corp. v. Harris, 280 Ala. 93, 190 So.2d 286, 290 (1966), with Bishop v. Faroy Sales, 336 So.2d 1340 (Ala.1976) (Alabama version of UCC 2-318 abolishes vertical privity). 4 We think judicial deference is equally applicable in the area of construction contracts.
courts should effectuate the expressed intent by denying the third party any direct remedy.
Ernst's effort to proceed against Providence on a third-party beneficiary basis must fail.

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