Construction Law Blog
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As was stated in Part I of this article, whether you negotiate your own subcontracts or rely on your lawyer to do the heavy lifting at contract time, a savvy subcontractor should understand the basic purpose of common subcontract provisions, and be prepared to negotiate for fair and commercially reasonable terms. While most sophisticated subcontractors are skilled at negotiating the core terms of a subcontract—scope of work, price, and time—a few simple but less obvious tweaks to common subcontract terms and conditions can go a long way to protect a subcontractor from unfair results when a dispute arises.
From the desk of an experienced construction lawyer, below are the last two of the top five “boilerplate” provisions that subcontractors too often overlook during contract negotiations, along with tips on language to include and to avoid. Follow this link if you missed Part 1 covering Delay/Liquidated Damages, Payment Terms, and Indemnity provisions.
Whether you negotiate your own subcontracts or rely on your lawyer to do the heavy lifting at contract time, a savvy subcontractor should understand the basic purpose of common subcontract provisions, and be prepared to negotiate for fair and commercially reasonable terms. While most sophisticated subcontractors are skilled at negotiating the core terms of a subcontract—scope of work, price, and time—a few simple but less obvious tweaks to common subcontract terms and conditions can go a long way to protect a subcontractor from unfair results when a dispute arises.
From the desk of an experienced construction lawyer, below are the first three of the top five “boilerplate” provisions that subcontractors too often overlook during contract negotiations, along with tips on language to include and to avoid.
The Washington State Court of Appeals recently addressed an excavation contractor’s responsibilities under the Underground Utilities Damage Prevention Act (UUDPA), RCW 19.122. That statute was enacted in 2011 and imposed certain statutory duties on parties involved with projects requiring excavation.
In this case, Titan Earthworks, LLC contracted with the City of Federal Way to perform certain street improvements including installation of a new traffic signal. During the process of excavating for the traffic signal, Titan drilled into an energized underground Puget Sound Energy power line. PSE sought damages from Titan and Titan sued the City of Federal Way.
The Tunnel Boring Machine (“TBM”) known as “Bertha,” built by Hitachi Zosen Corp in Osaka, Japan, was the world’s largest TBM at 57.5 ft. in diameter. The TBM was built to drill the Seattle SR 99 Viaduct replacement tunnel. Seattle Tunnel Partners (“STP”) has a contract with the Washington State Department of Transportation (WSDOT) to dig the two-mile tunnel which is now complete.
In December of 2013, tunneling was stopped ostensibly because a 119 ft.-long, eight-inch diameter steel well casing halted the TBM. See 2/15 Blog “Bertha is Stuck and She Remains Mired in Controversy.” Reports are that WSDOT installed the pipe in 2002 to measure groundwater levels and the pipe was allegedly mentioned in the reference material provided to bidders. STP had assumed that the pipe had been removed until the steel casing got stuck in Bertha’s cutting teeth, halting progress. See 1/30/14 Blog “Big Bertha Stuck: Differing Site Condition Principles Revisited.”
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.