Construction Law Blog
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Indemnity Clauses That Conflict with Oregon Indemnity Statute Can Remain Partially Valid and Enforceable
When the indemnity provision of a contract conflicts with ORS 30.140, it is voided to the extent that it conflicts with the statute, but no more. Such provisions can remain partially valid and enforceable.[i] In Montara Owner Assn., the owner brought claims against the contractor for construction defects and damage relating to the construction of 35 townhouses. Contractor then brought third-party claims against more than 20 subcontractors for breach of contract and indemnity. Before trial, contractor settled with all but one subcontractor. The subcontract contained an indemnity provision requiring subcontractor to indemnify contractor for losses arising out of subcontractor’s work, including losses caused in part by contractor’s own negligence.
Rotech Healthcare, Inc., a healthcare contractor, recently successfully protested the award of a home oxygen and durable medical equipment contract by the Department of Veterans Affairs to Lincare, Inc. based on an unsupported past performance evaluation and allegations of an unequal discussion. See GAO Protest File Number: File: B-413024 (August 17, 2016). The Request for Proposals (“RFP”) provided that award would be made on a “best value” basis to the offeror whose proposal was most favorable to the government based on the following evaluation factors with the following possible ratings:
- Joint Commission Accreditation (Acceptable or Unacceptable)
- Region of Service (Acceptable or Unacceptable)
- Past Performance (Excellent, Good, Satisfactory, Unsatisfactory, or Neutral)
- Technical Capability (Excellent, Good, Satisfactory, Unsatisfactory)
In a public works dispute in Massachusetts, a Massachusetts Court judge ruled that a general contractor could not recover any of its over $14 million claim against a public owner because it had violated its contract with the Owner by certifying that it had paid its subcontractors in full and on time when in fact it had not.[i] The case involves a contract dispute arising from a state and federally-funded project to design and construct a fiber optic network in western Massachusetts. The Owner was a state development agency established and organized to receive both state and federal funding to build a 1,200–mile fiber optic network known as MassBroadband123 in Western Massachusetts (the Project). Of that amount, $45.4 million was awarded pursuant to the American Recovery and Reinvestment Act of 2009 (ARRA). One of the stated goals of ARRA was (as its title suggests) to create jobs in the wake of the 2008 recession and to provide a direct financial boost to those impacted by the economic crisis. In the context of the instant case, that meant that, if there were to be subcontractors on the job providing labor and materials, they needed to be paid on a timely basis in keeping with the statutory purpose of stimulating the economy.
This is the seventh post in our “Top 10 Construction Contract Provisions” series. Prior posts discussed Price and Payment, Liquidated Damages, Consequential Damages – Part I and Part II, Indemnity, Scope of Work, and Flow-Down Provisions.
Today’s topic, Changes and Claims, is a contender for the top spot on our list, for both day-to-day impact on the job and importance in disputes. In fact, these provisions[i] are so variable and are involved in so many reported construction law decisions, that this post will not attempt to survey all their various forms, uses, or potential legal ramifications, but instead focuses on bottom line “best practices”—questions to consider as a general contractor, subcontractor, or owner when drafting, negotiating, or managing the Changes and Claims provisions of a contract. There is no “ideal” here, and the changes and claims procedures should be suited to the project, owner, contractor(s), likely issues, and other project-specific considerations. Key considerations include the following:
The Prompt Payment Act Obligation is Not Triggered When the Owner Holds Less Retention from the General Contractor
Most states have laws known as “prompt payment” statutes which govern the timing of payments on public works projects from project owners to general contractors, and from general contractors to subcontractors. The purpose of these statutes is to ensure that contractors and subcontractors who may have less leverage than the project owners and prime contractors, respectively, are paid for their work on a timely basis.
Oregon Court of Appeals Rules That Negligent Construction (Construction Defect) Claims Are Subject to a Two-Year Statute of Limitations
Statutes of limitations are distinct from statutes of repose. There is a lot of confusion between the two.
Generally, a statute of limitations is a law which sets the maximum period of time which one can wait before filing a lawsuit, depending on the type of case or claim. The periods vary by state and by type of claim. Most states also employ a “discovery rule,” which provides that the statute of limitations does not “accrue” until such time as the plaintiff knew or should have reasonably known that the injury or property damage has occurred.
The Defend Trade Secret Act of 2016 (DTSA) was signed into law on May 11, 2016, and became effective immediately. The DTSA allows an owner of a trade secret to sue in federal court for trade secret misappropriation. Previously, only state law governed civil misappropriation of trade secrets. While the DTSA largely mirrors the current state of the law under the Uniform Trade Secrets Act (UTSA), adopted by 48 states, including Washington, there are some additions found in the new law.
Waiving Workers’ Compensation Immunity for Indemnity: Demystifying a Common and Scary-Looking Contract Term
Parties to a construction contract are often skeptical of terms in bold fonts, capital letters, or underlining, and especially terms requiring separate signatures or initials. A natural assumption is that such terms must be harmful if they require such emphasis. This concern is further heightened when the term involves complex areas of law, or waivers of rights that the party may not fully understand. In such cases, a little knowledge can go a long way.
Construction contractors increasingly use drones to monitor and document progress on construction sites. Drones are becoming more and more common place in construction. One of our clients, an excavation contractor, uses a drone to fly the project before the bid. The contractor then uses the data gathered from the drone to create a topographic map, inputs the design elevations and plans in a computer, and calculates the quantities as a check of the owner takeoffs. This is an inexpensive check on quantities, which provides the contractor with a leg up in the bidding process.
Ahlers & Cressman has announced the promotion of Ellie Perka and James Lynch to partner of the firm. Both attorneys have demonstrated excellence and dedication in helping the firm’s clients resolve complicated construction disputes, and the firm is pleased to announce their joining the firm as partners.