Construction Law Blog
Blog Disclaimer: The content provided on this website is for informational purposes only and is not legal advice. Transmission of this information is not intended to create, and receipt does not constitute, an attorney-client relationship. The information provided is intended for general information which may or may not reflect the most current developments. Read More
Our readers are likely acquainted with business’ “Golden Rule”: “The party who holds the ‘gold’ (money) makes the rules.” When parties to a contract know that their dispute is headed to litigation or arbitration, an “upstream” party is often tempted to use whatever leverage it has, including withholding of funds, to force resolution of the claim. For example, holding funds otherwise due to a subcontractor when a claim arises, the general contractor may believe it can leverage the subcontractor into a more expeditious settlement position by “starving” the subcontractor of funds otherwise due and owing. This type of heavy-handed dealing does not generally sit well with arbitrators, judges, or juries, and can result in large damage awards, or “homeruns” against the party exercising this undue leverage. An example of the Golden Rule backfiring occurred in the East West Bank v. Rio School District. 235 Cal. App. 4th 742, 185 Cal. Rptr. 3d 676 (2015).
We recently wrote about design disclaimers here, but revisit the topic to further discuss how subtle language can transfer the entire risk for defective designs from the designer to the general contractor. Bidding contractors need to be aware that any language suggesting that a design may not be adequate for the item to function for its intended purpose may shift the entire risk of that design, including the costs to make the item function as intended, to the bidder.
Ahlers & Cressman PLLC attorneys have again been recognized as "Super Lawyers" and “Rising Stars” in Washington for 2015.
In federal government contracting, as in most public works contracts, contractors are required to comply with Contracting Officers' decisions. Contract clauses mandate that pending resolution of disputes, the contractor must proceed with the performance of the contract, the dispute notwithstanding.[i] Thus, even if a contractor suspects that the Contracting Officer directing the extra work does not have appropriate funds to pay for the changed work, the contractor has little choice but to perform the extra work. This is a trap for unwary contractors that expend their own funds only to find out that there is no appropriation to pay for the extra work. The Federal Anti-Deficiency Act was passed to prevent this very issue from occurring, but as contractors have learned, this Act has not precluded government employees from directing extra work for which they have no funds.[ii]
In the 2007 legislative session, the Washington State Legislature significantly expanded the definition of what constitutes a “Contractor” in Washington State, such that for the past 8 years a broad reading of the contractor’s registration statute, RCW Ch. 18.27, would require just about any person or entity, other than a residential homeowner, who is involved at any level in improving real property to be registered as a “Contractor,” irrespective if that person or entity hired a licensed contractor to perform work on real property that they own. This has imposed a burden to register as a contractor on persons or entities not performing any actual construction work, such as “house flippers” or developers, who retain general contractors to perform work for them, and do not so much as lift a shovel of dirt to improve the property that they own.
Construction is an aggregate-dependent industry. Sand, gravel, and crushed rock are the raw materials (aggregates) necessary to manufacture concrete, asphalt, road bed, and utility bedding vital to the infrastructure growth of the Puget Sound region. These mineral resource products are the building blocks upon which our state’s homes, commercial buildings, roads, bridges, and businesses are constructed. High-quality, economical, and locally-available construction aggregates in every county are fundamental resources to support not only the private construction industry, but also the State of Washington and its local and regional public works projects. If readily available construction aggregates are not regionally accessible, it must be transported by truck or barge to population centers. The cost of transportation has been steadily increasing, and the ever-expending haul of construction aggregates will have an adverse effect on local economies. Businesses will stop building in the region’s population centers, and resort to building in other communities, damaging the local economy. As with most issues, there are competing interests. Homeowners generally do not consider gravel pit operations to be good neighbors.
Early this month, the three-member Board appointed by the Washington State Department of Transportation (“WSDOT”) and Seattle Tunnel Partners (“STP”) to assist in resolving contractual disputes on the Alaskan Way Viaduct Replacement Project issued its latest recommendation. The question before the Board was narrow in scope: was an eight-inch steel well-casing within the work zone adequately identified in the contract? The Board determined that the well-casing was clearly identified in the contract, but the contract documents did not clearly identify that the casing was made of steel. The DRB’s recommendation was that the contractor encountered a differing site condition.
Nexus Between Work Performed and Cause of Action is Required for Six-Year Statute of Limitations to Run From Termination of Services
Recently, Division II of the Washington Court of Appeals held that for the six-year time period specified in RCW 4.16.326(1)(g) to run from the termination of services, rather than substantial completion of construction, there must be some nexus between the construction work performed at the claimed termination of services date and the cause of action.
Washington Court Strictly Enforces Default Provision, But a Material Breach Can Still Excuse Performance
The Washington Court of Appeals strictly enforced a default provision requiring notice and the opportunity to cure, but found that the party who failed to provide the notice could still contend a material breach occurred that excused its performance. In DC Farms LLC v. Conagra Foods Lamb Weston, Inc., a food processor was not excused from providing a contractually-required notice of default and opportunity to cure because it maintained that a farmer’s breach was incurable. 179 Wn. App. 205, 317 P.3d 543 (Div. 3, January 30, 2014). Failure to provide the notice of default and opportunity to cure was a breach of contract by the food processor.
Public Private Partnerships (“P3”) generally involve a performance-based contract between a public sector (any level of government) and a private sector (usually a consortium of private sector companies working together) to arrange financing, delivery, and typically long-term operations and maintenance (O&M) of public infrastructure projects. P3 contracts referred to as Project Agreements are typically awarded through the competitive bidding process. The private partner is contractually obligated to fulfill the Project Agreement (at the risk of losing its investments), which binds its obligations as defined by the State.