Construction Law Blog
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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]
A basic principle of construction law is that one who furnishes plans and specifications for a project impliedly warrants that the plans and specifications are workable and sufficient. A long line of Washington cases has recognized this rule.
This is the fifth post in our "Top 10 Construction Contract Provisions" series, which covers the topic is price and payment provisions. Although these are typically separate terms they are so closely related that we are counting them together in our "Top 10." Together, they answer some of the most fundamental questions about the contract: What will be paid for the work, when, and how? Part I of this post will cover the different type of pricing arrangements. Part II of this post will cover the related topic of payment, including how and when payments are made toward the overall contract price.
A problem that often arises with respect to change orders concerns the nature and amounts of compensation that the change order payment is intended to provide. While the contract documents will commonly set forth specific methods for determining the direct cost of extra work, the contract documents may not address whether the issue of impact costs is to be included in the change order or not. It is important to ascertain if the extra work provisions in the contract provides for such coverage, especially in preparing an impact claim after the extra work price has been accepted. Generally, the contractor should make a careful review of the contract documents and follow the methods set forth in the contract for change order pricing.
A differing site condition is a condition other than weather, climate, or other act of God, discovered on or affecting a construction site that differs in some material respect from what was reasonably anticipated.[i] The conditions must be physical; changes in political or economic conditions, or labor issues are not differing site conditions. It may surprise some contractors that in the absence of a contract clause providing otherwise, the risk of any cost or difficulty associated with unexpected subsurface conditions are generally borne by the construction contractor.