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
The implied duty of good faith and fair dealing is implied in every contract, including construction contracts. Generally speaking, this implied duty requires parties cooperate with one another so that they each obtain the full benefit of their contracted bargain. Recently, the Court of Appeals (Division II) in Nova Contracting, Inc. v. City of Olympia discussed this duty’s application to a public works contract.
In early 2014, the City of Olympia published an invitation for bids to replace a culvert that conveyed a creek underneath a paved bike trail. Nova Contracting was awarded the Project. The specifications required that Nova submit a number of submittals, the approval of which was required before Nova could commence work. The contract also provided that the City’s decision with respect to these submittals would be final and that Nova would bear all risk and costs of delays caused by non-approval of any submittals.
Construction attorneys rarely encounter state and local tax issues. However, in a recent negotiation over a disputed change proposal, an Owner’s attorney argued that Washington prohibits recovery of B&O tax as a separately-billed line item in the change proposal. Given that itemization of B&O surcharges seemed a fairly common business practice, I was initially skeptical of the position. Upon further review, it became apparent that the Owner’s argument was indeed correct and that many contractors may be unknowingly violating the law by separately itemizing and adding a percentage for B&O tax to their billings or change proposals.
General Construction v. Grant County PUD: Chalkboard Notice is Invalid and Engineer Cannot Waive Notice Requirements
I previously posted a blog about the General Construction v. Grant County PUD case and the Court of Appeals’ rulings regarding notice and claim procedures.[i] The General Construction case is also noteworthy for two other issues that were raised in that case.[ii] The first issue involved whether a contractual written notice requirement is satisfied when the notice is provided on a chalkboard only. The second noteworthy issue is whether the Public Utility District’s (“PUD”) own in-house engineer could waive the contractual notice and claim procedures in the PUD’s contract.
Another court in Washington was asked to apply the Mike M. Johnson[i] decision to a contractor’s claim for extra work. This time it was the Division III Court of Appeals in Washington. The Division III Court of Appeals, which covers all of Eastern Washington, had a hand in the original Mike M. Johnson case. That court is the intermediary court that ruled in favor of the contractor in Mike M. Johnson. It held that there were issues of fact as to whether Spokane County, in the Mike M. Johnson case, had actual notice of the changed conditions and, thus, waived the notice and claim procedures that the County was attempting to rely upon. The Division III Court of Appeals was later overruled by the Washington State Supreme Court, which held as a matter of law that the County of Spokane had not waived the notice and claim procedures. This time around, the Division III Court of Appeals, for the most part, ruled in favor of the public entity and followed the Mike M. Johnson decision.
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:
As discussed in previous blog posts, a Termination for Convenience (“TforC”) clause allows a party (generally, the owner or general contractor) to stop work for just about any reason without having to pay for anticipated profit or unperformed work. Read more here and here. Recently, the Washington Court of Appeals decided SAK & Associates, Inc. v. Ferguson Construction, Inc. in which the Court held that all that is required to trigger a TforC clause is a statement that termination is being invoked for the convenience of the terminating party. Read more here.
Massachusetts Court Rules That a GC/CM is Permitted to Pursue an Owner for Design Defects Even if the GC/CM was Involved in the Design Process – Part II
This is part two of a two-part blog post on the potential differences of GC/CM contracting. Read part one of this series here.
As reported last week, a Massachusetts trial court recently ruled that a Construction Manager at Risk (“GC/CM”), due to the material changes in roles and responsibilities undertaken in modern GC/CM contracting, is no longer afforded the protections that courts historically have extended to contractors (the implied warranty of the adequacy and sufficiency of the plans and specifications). The highly-anticipated appellate ruling in Coghlin Electrical Contractors, Inc. v. Gilbane Building Co. was issued in September 2015. The court ruled that the GC/CM’s pre-construction involvement in design does not preclude the GC/CM from raising a Spearin claim (i.e. claim of breach of the implied warranty of the adequacy and sufficiency of the plans and specifications). Spearin’s applicability under the GC/CM delivery method had not been a direct subject of any court case until Coghlin.
Massachusetts Court Holds GC/CM Assumed the Risk of Design Changes on Public Works Contract – Part I
This is part one of a two-part blog post on the potential differences of GC/CM contracting.
A recent Massachusetts Superior Court ruling spotlights the difference between contracts fashioned in the traditional design-bid-build protocol versus a negotiated general contractor / construction manager (GC/CM) type of procurement. A GC/CM (or, in some states, a CM/GC) firm provides a range of pre-construction services and construction management services—services that may include cost estimation, consultation regarding the design of the building project, preparation and coordination of bid packages, scheduling, cost control, value engineering, acting as the general contractor during construction, detailing the trade contractors’ scopes of work, holding the trade contracts or other subcontracts, pre-qualifying and evaluating trade contractors and subcontractors, and providing management and construction services—all at a Guaranteed Maximum Price (or, in some states, a Maximum Allowable Construction Costs), which represents the maximum amount to be paid by the public agency for the building project. The Guaranteed Maximum Price generally includes the cost of the work, the general conditions, and the fee payable to the GC/CM firm.
Recent Court of Appeals Decision Finds in Favor of Contractor With Respect to Mechanic’s Lien’s Priority Over Lender’s Deed of Trust Based on Six-Hour Time Difference and Unsigned 18% Interest Provision—Part II: Interest
In Part I of this two part article, we addressed a recent Division 2, Court of Appeals case that addressed two issues of first impression: (1) whether a voluntary release of an earlier lien precludes filing of a second lien, and (2) whether an interest provision requires that the contract be signed. [i] Ultimately, the Court held that the contractor was not precluded from filing a second lien despite the earlier release and, therefore, the contractor’s lien had priority over the lender’s Deed of Trust based on work completed by the contractor just six hours prior to the lender recording the Deed of Trust. As discussed in more detail below, the Court also held that the contractor was entitled to interest despite the fact the interest provision was unsigned.
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]