Background

The Innsmouth Central School District (the "District") in upstate New York planned to build a new athletic field, with stadium seating and other facilities (locker rooms, showers, etc.), on its property located along the Northern bank of the Miskatonic River (the "Project"). After competitive bidding, the District properly awarded the site work contract (the "Contract") to Lovecraft, Inc. ("Lovecraft") for a lump sum of $450,000.

Relevant Contract Terms

The Contract required Lovecraft to clear and excavate the site, including an area close to the Miskatonic River bank, where a rare, wild plant known as Yog-Sothoth was growing, and to level and restore the excavated area by refilling it with Yog-Sothoth-free soil and grass. Other notable provisions in the Contract are as follows:

PERMITS. Owner shall obtain all necessary permits for Contractor's Work on the Project.

CHANGE IN CONTRACT PRICE OR TIME. If Contractor wishes to make a claim for an increase in the Contract Price or an extension of time to perform the Work, Contractor shall give Owner written notice within 24 hours after the event giving rise to such claim. Such written notice shall specify the condition or circumstance on account of which such claim is asserted, and shall specify the increase in the Contract Price and/or time to perform which Contractor believes is justified on account of such condition or circumstance. Failure to strictly comply with the requirements of this paragraph shall result in a waiver of Contractor's claim.

NO DAMAGE FOR DELAY. Contractor agrees not to make any claim for delay costs, loss of productivity or efficiency, lost profits or extended home office overhead, on account of any delay, obstruction or hindrance for any cause whatsoever, whether or not foreseeable, whether or not anticipated and whether or not caused by Contractor.

Under Education Law § 3813 (a statute relating to claims against a school district), a contractor must present a written, verified notice of claim to a school district within 3 months of the date the school district rejects or denies the contractor's claim for payment under a contract. See New York Construction Law Manual, 2013 ed., § 7:18. Once the contractor has submitted its verified notice of claim, the contractor has 1 year to sue the school district to recover on the claim, running from the date of the denial or rejection of the claim.

The Dispute

Lovecraft began work on the Project on April 1, 2012. On July 1, 2012, the New York State Department of Environmental Conservation (the "DEC") ordered all work on the Project stopped because the District had failed to obtain a permit required under a Federal law that protected Yog-Sothoth. As a result, Lovecraft was prevented from working until the necessary permit was obtained. Lovecraft's equipment and personnel remained on site during the stoppage period.

On November 1, 2012, the District advised Lovecraft that it had obtained the required permit and ordered Lovecraft to recommence work. Lovecraft started working again, but by November 15, 2012, the ground was frozen and Lovecraft was unable to excavate or otherwise continue working on the Project.

On November 15, 2012, Lovecraft sent a letter to the District indicating that Lovecraft was entitled to a reasonable extension of time and compensation for the delay occasioned by the DEC's stop work order and the schedule's slippage into the winter. On December 13, 2012, the District wrote back to Lovecraft, rejecting Lovecraft's claim for an extension of time and compensation for the delay. Lovecraft kept its equipment on site, but was unable to resume work until March 15, 2013.

On April 1, 2013, the DEC issued yet another stop work order for the Project because the District had not actually obtained the necessary permit. The permit finally came on May 30, 2013. Lovecraft was back to work on June 1, 2013 and completed work on September 1, 2013.

On September 2, 2013, Lovecraft sent its final payment application to the District, which included costs due to delays (i.e., the costs to keep its equipment and personnel on site during the stoppage periods and the winter months when work was unfeasible). On September 30, 2013, the District sent notice to Lovecraft that its final payment application was rejected because "the delay costs are barred under the Contract." On October 15, 2013, Lovecraft serves a written, verified notice of claim for its contract balance and delay damages on the District.

Assume that, on December 12, 2013, Lovecraft sues the District for breach of contract, seeking its contract balance and delay damages. How will the lawsuit play out?