This year, every other blog post will address common construction contract clauses. My hope is that my readers will either find the content a good refresher or provide a new understanding of common construction clauses. Today, I’ll address the Scope of Work provision. Some contractors and construction attorneys would argue that the Scope of Work provision in the contract is the most important section because it defines what a contractor [...]
Congratulations, you have just been awarded a big contract. You have beaten out your competition and this project will show case your company’s talents and dedication to the industry. You have mobilized your crew and you are ready to get to work. Then you get the notice from the owner that the project is canceled, and you are terminated for convenience. This is far from convenient for you, but what [...]
Over the past few years, I’ve posted blogs about the Seattle Viaduct project and the problems Bertha, the tunnel-boring machine, ran into on the project. Not surprisingly, the parties sued each other. And, Big Bertha’s problems continued into the courtroom. As some of you may recall, Big Bertha was launched with much fanfare, then ran into a pipe and stopped working. The project was finally completed in February, 2019, three [...]
Waiver of Subrogation clauses are contained in nearly every form construction contract. Contractors sign them as a matter of course, but how often do you actually consider what it means to waive subrogation? In this blog, we’ll discuss what subrogation is and why it’s usually a good idea to waive it. What is Subrogation? Legally speaking, subrogation is a concept that allows an insurance company that has paid a loss [...]
There are fundamental differences between insurance and surety bonds and knowing the difference will help you avoid making mistakes, should claims arise. This blog will discuss the differences between insurance and surety bonds. Insurance An insurance policy is a two party contract between an insurer and the insured. The policy is intended to protect the insured. The cost of insurance is calculated by the insurer based on how many claims [...]
Recently, I have had a number of conversations with contractors that are worried about getting paid on a project. Invariably, these contractors want to know what they can do to get what they are owed. Rarely is there an easy button to force these funds out of the owner or upstream contractor’s hands. And, a number of factors will figure into the analysis. A few things I would want to [...]
A recent case out of Maryland ruled that a subcontractor must pay a general contractor $2,500,000 for construction defects arising out of a 2004 project. Now, the case did take three years to wind its way through the courts, but would you be ready to defend even a 12-year-old claim? Would you have kept the contract and documents related to the project? Background This project involved the construction of a [...]
How often do you review the payment terms of a contract with an eye toward whether you are waiving lien rights under that contract? This is something you should consider if your contract contains a pay-if-paid clause. I am often times asked about the difference between a pay-when-paid and pay-if-paid clause. The real difference is that a pay-when-paid clause simply allows a contractor a reasonable amount of time by which [...]
The short answer is maybe. Nebraska courts have long held that a general contractor can be held liable for a subcontractor’s employee’s injury, but only if the general contractor exercises significant control over both the worksite and the subcontractor. The question becomes whether the general contractor’s conduct demonstrates this control. A general contractor that retains control over a subcontractor’s work has a duty to use reasonable care to prevent injuries [...]
As we have discussed in other blog posts, filing a construction lien on time is critical to preserving your claim. If you file a construction lien in Nebraska outside of the 120-day window, your lien will be invalid. This past week, we filed a construction lien electronically in Douglas County. This means that we submitted the lien on-line and waited for a Douglas County employee to review the lien and [...]
Construction contracts often contain liquidated damage provisions, requiring a contractor to pay a set amount for each day the project is delayed. But, as the Nebraska Supreme Court recently ruled, in U.S. Pipeline v Northern Natural Gas, an owner can waive liquidated damages where its actions induce the belief that the owner intended to waive liquidated damages. In this case, the parties agreed that the work would be done in [...]
As the project is winding down, it is crucial that you include all remaining claims in your final pay application. A recent Nebraska Court of Appeals decision drove this point home when it ruled that a contractor was not entitled to additional compensation it requested after submitting its final pay application. In ARR Roofing, LLC v. Nebraska Furniture Mart, Inc., ARR Roofing was hired to replace the roof and decking [...]
When you review a construction contract, are you also reviewing the description of the Work that you’ll be doing? I mean, are you really looking at that section to make sure that it accurately describes what you will be doing, and perhaps more importantly, it identifies Work that you will not be doing? I recommend that you spend a few extra minutes with your contracts to make sure the Work [...]
This is a continuation of the series of blogs on preserving your rights to get paid on a construction project. The most effective tool you have to get paid is by filing a construction lien. But, there’s a lot to consider before you file that lien. This blog will cover how long your lien will last once it is filed. The Nebraska Construction Lien Act provides that your lien will [...]
We all know the importance of filing a construction lien within 120 days of your last work. Nebraska Construction Lien Act, § 52-137. But, equally, if not more important is filing the construction lien on the correct property. Often times on a construction project, the exact address of the project may not be known. And, if there are a few buildings going up on the same general site, [...]
Contractors often ask if they should include a one year warranty in their subcontracts. I tell them that they can, but it may be more effective to include a one-year correction period. If a contractor does include a warranty in the contract, it may actually extend the time in which a contractor may be sued. I recommend instead a Correction Period. Typical Construction Warranties Form construction contracts, like the AIA forms, [...]
I have had the pleasure of working with Cordell Parvin, who in his earlier career was a preeminent construction attorney, and now coaches attorneys. Cordell has shared countless construction guides and presentations with me over the years, for which I am extremely grateful. Below is Cordell's Lesson's Learned list, that is as true today as when he drafted it years ago. Contracts and owners are not all alike. Some are [...]
Last month’s Engineering News Record Magazine contained an editorial noting the worst projects of the year. Are you prepared if you have a bad project? As the editors aptly pointed out: By their nature, bad projects disappoint owners, incite hostility among team members, slip months and years past scheduled completions and drain finances. ENR pointed noted a few projects from 2014 that did not go well. They included: Wayne County [...]
After last week’s blog about what is covered by a CGL policy, I received a number of questions about whether Nebraska courts would cover faulty workmanship. So, what is covered by a CGL policy in Nebraska? The latest Nebraska Supreme Court case on this issue, Auto-Owners Ins Co v Home Pride Companies Inc, in 2004, ruled that faulty workmanship is not covered under a CGL policy. But, the insurer was [...]
A recent case out of Colorado raises a question as to the continued use of the accepted and completed work doctrine and indicates that courts are abandoning the rule in favor of the foreseeability rule. Nebraska courts still apply the accepted and completed work, but change may be afoot. Let's take a look at these two rules. Accepted and Completed Work Doctrine Under the completed and accepted rule, an independent [...]
Negotiating construction contracts can sometimes seem more difficult than the work itself. Knowing what to look for can help you in your contract negotiations. While there are any number of key contract provisions, this blog will address two: indemnity and delays. Indemnity Indemnity shifts loss from one party to another. In construction contracts, the parties can agree to shift responsibility, and more often than not, the owner or up-stream contactors [...]
As you may know, the Nebraska Legislature is back in session. During the first ten days of the session, senators may present bills to be considered throughout the session. So far, over 400 bills have been introduced. I’ve come across two bills that may be of interest to Nebraska’s Construction Industry and they both relate to construction liens. Legislative Bill 3—This bill, introduced by Senator Krist, would require that when [...]
Are you reviewing the first contract of the New Year yet? If you are, I hope you are looking to see whether it contains a no damage for delay provision. These provisions are enforceable in Nebraska and can turn a viable project into a disaster. What is a no-damage-for-delay provision? Generally speaking , a no damage for delay provision places the risk of loss caused by a delay on the [...]
You know the drill – you learn about a project and you submit a bid. The bid is usually your own form, setting forth cost of materials and labor, and your contact information. This bid is an opportunity for you to incorporate some terms to improve your bargaining position with the general contractor. Some terms to consider are: Void Date. You could make your bid void unless it is accepted, [...]
We often times get so embroiled in a dispute that voluntary resolution seems far fetched But, mediation, where the parties work with an impartial party to generate their own solution in settling their conflict, should always be considered because of the costs savings, control and closure. Cost First, what costs are we talking about? Obviously cost includes attorney’s fees. But, internal costs are also high. Preparing for trial takes employees out [...]
The Prompt Pay Act, Nebraska Revised Statutes § 45-1201 to 41-1210, applies to construction contracts entered into after October 1, 2010. This is the second of two posts highlighting the key provisions of the Prompt Payment Act. When Payments May be Withheld The Act allows a contractor to withhold payments in five situations: Retainage, as provided for in the contract, until the project is substantially completed; After substantial completion, 125% [...]
Now that Nebraska’s Prompt Pay Act is in full swing, it’s a good time to consider how it will impact your rights under construction contracts. The Prompt Pay Act, Nebraska Revised Statutes § 45-1201 to 41-1210, applies to construction contracts entered into after October 1, 2010. This is the first of two posts highlighting the key provisions of the Prompt Payment Act. Impact on Public Projects The Act has clarified [...]
A recent Engineering News Record had an interesting article discussing recovery risks after surviving the recession. The article, by Richard Korman, raised an interesting point of contractors taking on too much work at the backend of a recession without the necessary infrastructures in place. Not surprisingly, one of the main difficulties in emerging from a recession is that contractors are short on cash and qualified personnel. So, when a contractor [...]
A client stopped by for some help with a contract. And, to this client’s credit, they knew they were dealing with a chopped up AIA contract that had so many changes, it was hard to tell what was in the original contract and what was a revision. Construction contracts, with their indemnity, subrogation, pay-if-paid clauses, can be so complicated. But, one advantage to the forms, like those from the AIA, [...]
As discussed in previous posts, here and here, it is vitally important for contractors to establish a contract administration system. In this post, we will discuss maintaining key documents to successfully prove your claim. In the first two posts we discussed the importance of reading and understanding the contract, and identifying the risks and theories of recovery. In the final part of this series, we will discuss some practical advice for [...]
As promised, here are a few more necessary steps to set up a Contract Administration System. You can find the first two steps here. Today, we’ll discuss contract risks and the theories you may pursue to recover your damages, along with checklists for making common claims. Who is Responsible for the Risk? It is important to consider who is responsible for the risk associated with the project. When considering who [...]
These is the first in a series of blogs that will discuss the importance of creating a Contract Administration System that will help you better track your contracts and improve your chances of recovering full payment. Below are the first 2 of 10 steps to create a Contract Administration System. But first, why set up a Contract Administration System? It is becoming increasingly difficult to get owners to pay for change orders [...]
A general contractor may be held liable for delays, even after the general has been terminated. In a recent Missouri case, an owner terminated a general contractor for cause, and the owner then demanded that the terminated general contractor pay for delay damages caused by the replacement general contractor’s subcontractor. The court ultimately held that delay damages could be recovered even after the general was terminated from the project. In [...]
How well do you communicate with your bonding company when you receive notice of a claim? A recent case out of Indiana highlights the problems that can occur if you do not investigate the claims and timely report back to the bonding company. In this case, the bonding company was contacted by various subcontractors demanding payment. The bonding company called the contractor to investigate the claim. It took several weeks [...]
Amending your construction lien is not as easy as you might think. You cannot simply revise the dollar amount of your claim or the location of the property, if you didn't have it right the first time. Nebraska statutes require more information in the amended lien. And, if you don’t include it, you run the risk of your lien being declared invalid. Nebraska § 52-148 authorizes the amendment of construction liens, but [...]
The Nebraska Court of Appeals recently decided a construction defect claim that illustrates the frustration that may result with taking a case to trial. After one trial and two appeals, the Court of Appeals sent the case back to the trial court to try the case a second time. And, this was over a $15,000 claim. This is one of those situations where someone is saying, “Only the attorneys got [...]
Construction contracts often contain notice provisions that a subcontractor must follow to request additional compensation for work performed. While the notice provisions are generally straightforward, they are often one sided and a subcontractor’s failure to follow them may bar the subcontractor’s claim. A common form of change order is found in the AIA A201, which provides: Claims by either the Owner or Contractor must be initiated by written notice to [...]
As a general contractor, you hate to hear that your subcontractor will not honor its bid. But, there are remedies. You may even be entitled to expectation damages – the difference between what you thought you were going to pay the old subcontractor and what you paid the new subcontractor. When a subcontractor submits a bid on which the general contractor relies in bidding a project, the general contractor may [...]
With governmental projects continuing to be a major source of business in these tough times, it is important to keep in mind Davis Bacon wage requirements. If you don’t, you can be assured that the Department of Labor will come knocking on your door. Here are a few pointers on paying Davis Bacon wages: The Davis Bacon Act requires you to pay your employees a minimum Davis-Bacon wage. The wage [...]
How often have you started working on a project without a signed contract? My experience has been that subcontractors do it all the time. But, what does it mean? A recent case out of Montana sheds some light on this issue. In this case, the subcontractor submitted its bid to the general contractor. The GC signed the bid on the acceptance line, but wrote in “pending contract with the owner." After the [...]
Contractors often complain that while government contracts are good for business, the governmental bureaucracy is oftentimes more hassle than it is worth. A recent decision of the Boards of Contract Appeals and the Comptroller General drives this point home. In this recent situation, a service-disabled veteran-owned small business was the low bidder on a Department of Veteran Affairs project. However, the contracting officer determined that the low bid was unreasonably [...]
The NLRB has again delayed the date by which you must post the employee rights poster. This poster was originally to be posted in November, then by January 30, 2012. Now, posting requirements are delayed until April 30, 2012. You can read the NLRB’s press release here. The NLRB explained that this latest delay was requested by the federal court hearing the challenges to the rule. Those opposing the rule, [...]
I came across a Linked-In post the other day in which an attorney was asking whether he should add any extra language to an AIA agreement between the owner and contractor. This question got me wondering how many construction companies ponder the same question. Here are some questions to think about as you wait for the holiday party to start. Should your attorney review the contracts you are signing? And, [...]
A friend of mine, Cordell Parvin, retired construction attorney and now legal consultant, recently shared a list of core competencies that he expected new construction attorneys in his firm to learn. Here is a copy of his list. It covers everything from general knowledge of the construction industry and construction law, to contract drafting and dispute resolution. It also contains a few items that I need to brush up on. It also got me thinking [...]
Last month, OSHA visited America’s Fiberglass Animals in Minden for a follow-up visit. To put it lightly, the follow-up visit did not go well. OSHA slapped America’s Fiberglass Animals with nearly $170,000.00 in penalties. This hefty penalty certainly makes me wonder how you are doing in your OSHA compliance. Here is a breakdown of the penalties. They fell into three categories: • $63,000.00 related to fines for failure to abate [...]
Did you know that you may be able to limit your liability on a construction project? Limitation of liability provisions are enforceable in Nebraska and may provide an effective method to limit your liability. Limitation of liability clauses generally set forth the upper limit a contractor may be liable for the work it performs. These clauses often times contain language like: Contractor’s maximum liability to Owner for all damages shall [...]
Unfortunately, it does not appear that the construction industry is headed for a turnaround, yet. Last week, the U.S. Department of Commerce, Housing and Urban Development issued a report on new residential construction through August, 2011. The report noted that housing starts were down 5 percent from last July, which is the lowest it had been in three months. And this represents less than half the number of homes that [...]
Our clients are often times frustrated at the lack of clear delegation and responsibility on GREEN building projects, such as those pursuing Leadership in Energy and Environmental Design (LEED) designation. While LEED projects mandate an integrated process and seek input from all parties, there is very little guidance as to each party’s obligations. To avoid this confusion, we recommend contractors take some preliminary steps to clarify their duties and responsibilities [...]
A contractor sometimes believes that once the lien is filed, they are home free for getting paid. Unfortunately, that is often not the case. There are always concerns about whether the owner has sufficient funds to pay the contractor and subcontractors. Obviously, that is why the lien was filed. There are also concerns about whether there is any equity in the property to satisfy the liens. But, even if you [...]
If you are a contractor doing business in Nebraska, you should be registered under the Contractor Registration Act. Although the registration requirements are not difficult, the penalties for failing to register can be significant.Under the Contractor Registration Act , all contractors performing work in Nebraska, both Nebraska and out of state companies, must be registered with the Department of Labor and obtain a registration number. The registration process is available on-line [click here] [...]
