In June 1983, Pyramid International, Inc. subcontracted Straus Systems, Inc. to perform mechanical work on the Red River Army Depot Project. Following Pyramid's default in 1985, sureties assumed the role of prime contractor and hired Contract Surety Consultants, Inc. to oversee the project. Straus signed an Agreement of Assignment Subcontract, acknowledging the assignment of its subcontracts to the sureties. Between October 1984 and November 1985, Straus notified Pyramid and the sureties of delays but did not request additional time or specific delay damages until five months post-completion in October 1987.
Straus subsequently sued the sureties for approximately $1,000,000 in delay damages, citing the Miller Act, breach of contract, quantum meruit, and negligence. The district court granted summary judgment for the defendants, ruling that Straus did not comply with the subcontract's procedural requirements for notifying delays as outlined in Paragraph 17, which mandated written notice within 48 hours of any obstruction. The court also emphasized that, under the contract, the only remedy available to Straus for delays was to seek an extension of time, not damages.
The appellate court addressed three issues raised by Straus: (1) whether the subcontract's paragraphs 17 and 20 prevent Straus from claiming delay damages; (2) whether Straus met the subcontract's notice requirements to pursue such claims; and (3) whether the sureties accepted liability for Pyramid's breach of contract. The court concluded that the subcontract explicitly precludes Straus from seeking monetary delay damages, rendering the second and third issues moot.
The core issue was whether the subcontract permitted claims for monetary delay damages or limited compensation to time extensions due to delays caused by Pyramid. The court reviewed the subcontract's interpretation as a legal question, adhering to Texas law that emphasizes the parties' intent as expressed in the contract language. The absence of ambiguity in the contract allowed the court to determine intent solely from the contract itself.
The court noted that contractual provisions anticipating delays can exclude the right to recover damages, and that an extension of time as a remedy could be considered exclusive in a construction contract context. Although Straus argued that the Sureties owed delay damages due to an implied obligation not to delay performance, the Sureties contended that the subcontract's language in paragraphs 17 and 20 limited Straus to an extension of time as the sole remedy.
Ultimately, the court affirmed the trial court's ruling that the Sureties are not liable for delay damages, confirming that the subcontract's provisions indicated the parties had considered delay and agreed that the only remedy available would be an extension of time.
