The Storm After the Storm: Restoration Contracts

An article in Gray Reed & McGraw’s Texas Construction Law Blog offers some steps cleaning and restoration professionals can take in an effort to minimize the damage from a payment dispute with a client after a natural disaster.

Authors Russell Jumper and Tim Fandrey point out the importance of having a form agreement specific to natural disaster mitigation and remediation ahead of time.

Other points discussed in the article are the agreed scope of the project, making sure insurance proceeds go to the contractor, keeping the client or insurer from taking an estimate to a competitor, and being prepared for litigation.

Read the article.




Long-Running Construction Defect Fight in Texas Ends With Defense Win

A decade-long construction defect battle involving a South Padre Island, Texas, luxury condominium complex damaged during Hurricane Dolly has been resolved in a take-nothing defense win secured by attorneys of the West Mermis law firm for the general contractor, G.T. Leach Builders.

The condominium developer, Sapphire, initially sued its insurance brokers for negligence for allowing the builder’s risk insurance policy to expire, leading to claims for extensive damage to the Sapphire condominium project from the 2008 storm. Nearly three years later, G.T. Leach and several of its subcontractors were added to the $30 million lawsuit.

The trial team, led by Lawrence J. West, presented evidence proving that the developer’s allegations of multiple breach of contract claims were unsupported, according to the firm. They demonstrated that the contract contained express provisions that prevented the Developer from recovering the $30 million it was demanding.

Read details of the case.



Do Architects and Engineers Owe a Legal Duty to Non-Contracting Parties?

A recent unpublished Michigan Court of Appeals opinion provides some guidance with respect to the architect’s and engineer’s common law duty when processing pay applications, according to a post on the website of Clark Hill.

Jeffrey M. Gallant and Scott D. Garbo explain that the court held that the owner of a construction project could not maintain a professional negligence claim against the architect for failing to adequately review payment applications.

“While you may only have a contract with one of many project participants, Michigan courts continue to elaborate on the potential obligations owed to all other participants, including architects, engineers, contractors, subcontractors, owners, and lenders,” they write.

Read the article.




Claim of Fraudulent Inducement of a Construction Contract Does Not Invalidate Arbitration Clause

Pepper Hamilton LLP’s Constructlaw blog discusses an Ohio case in which a plaintiff sued a building company and attempted to have the arbitration clause in a construction contract declared unenforceable.

The contract identified the builder in the case by a name that was a fictitious name for a similarly named company and was not registered with the Ohio secretary of state, writes Emily D. Anderson. The trial court denied plaintiffs’ motion to invalidate the arbitration clause.

The appellate court agreed with the trial court, observing that the builder did not initiate the action but was merely defending it.

Read the article.




Defense Scores Arbitration Win in Long-Running Construction Defect Fight in Texas

A decade-long construction defect battle involving a South Padre Island, Texas, luxury condominium complex damaged during Hurricane Dolly has been resolved in a take-nothing defense win secured by attorneys of the West Mermis law firm for the general contractor, G.T. Leach Builders.

The condominium developer, Sapphire, initially sued its insurance brokers for negligence for allowing the builder’s risk insurance policy to expire, leading to claims for extensive damage to the Sapphire condominium project from the 2008 storm. Nearly three years later, G.T. Leach and several of its subcontractors were added to the $30 million lawsuit.

In a release, the firm said G.T. Leach sought to enforce the arbitration provision of its contract, with appeals ultimately progressing to the Texas Supreme Court. The company was represented by attorneys from Houston-based West Mermis, which routinely handles construction and contract disputes, products liability and general business matters.

The release continues:

The Texas Supreme Court’s decision in G.T. Leach Builders, LLC vs. Sapphire VP LP, 458 S.W.3d 502 (Tex. 2015), which sent the dispute to arbitration, stands as a landmark opinion now routinely cited in similar cases.

After settling with all other parties, Sapphire entered into arbitration with G.T. Leach in 2017. During the proceedings, the defense team, led by West Mermis name partner Lawrence J. West, provided evidence refuting multiple breach of contract claims and challenging factual allegations.

“Despite claims to the contrary, the Sapphire project had not been completed when Dolly made shore. It was imperative to show the arbitrator that our client acted reasonably and responsibly,” said Mr. West. “It was an exceptionally complex case that had endured a number of detours, but we are pleased to have secured the decisive win G.T. Leach deserved and that this chapter can finally be closed.”

Also representing G.T. Leach were West Mermis attorneys Justin W. Safady and Stephen A. Dwyer.



Defend, Indemnify, Hold Harmless – What This Contract Language Means for A/E Professionals

J. Brandon Sieg of Vandeventer Black LLP addresses the question of what is meant when a contract requires an architect or engineer to “defend, indemnify, and hold harmless” the project owner for specific (or not so specific) types of claims that might arise in the future.

Regarding duty to defend, he explains that: “If you agree to similar language in your design contract, then you are agreeing to hire the project owner’s lawyer to defend a lawsuit filed against the project owner.”

He also covers responsibilities that go with indemnification and “hold harmless.”

Read the article.




The Importance of Attention to Risk Allocation Provisions in Contracts

A recent Indiana Court of Appeals decision illustrates the importance of having an overall risk allocation strategy in contracts where appropriate, and paying close attention to the language used to express that strategy, writes Christian Jones of Barnes & Thornburg.

In the post on the firm BT Policyholder Protection Blog, Jones writes that this is particularly when multiple contracts and parties are involved.

“This case illustrates the difficulty of coordinating risk allocation language across multiple contracts. [The insurer] might have attempted to pursue subrogation claims under any circumstances, but it seems possible that litigation might have been avoided if all of the contracts at issue had contained their own express waiver of subrogation clauses” Jones explains.

Read the article.



A Case Against One-Size-Fits-All Construction Contracts

Construction design planningForm documents published by the American Institute of Architects can sometimes be a one-size-fits-all approach often does not adequately protect the developer when issues arise on a construction project, according to a post on the website of King & Spalding.

Robert B. Garner and Peter A. Berg write that of the biggest problems a developer faces in using the AIA forms is selecting the proper form for its project.

“One of the biggest problems a developer faces in using the AIA forms is selecting the proper form for its project,” they explain.

“Without careful thought and modification to standard forms, developers can find themselves in a difficult position in a delayed and over-budget project, even if developers signed a contract with a ‘guaranteed maximum price.’ Project development requires detailed attention to all aspects of your latest construction agreement,” the authors write.

Read the article.




How to Build a Solid Contractual Risk-Transfer Program

Liability risk managementThe use of subcontractors helps to ensure construction projects are completed in a timely and efficient manner, but it also creates a wide range of contractual risks, cautions Tommy Williams, USI Uniondale vice president, in an article for Property Casualty 3600.

“Without a properly structured risk-transfer program, a general contractor (GC), owner or property manager would assume financial responsibility unnecessarily for losses caused by a third party, who is contractually obligated to control or prevent those losses. The financial impact could be significant — more so in certain jurisdictions,” he explains.

His article discusses the basics of contractual risk transfer, common subcontractor policy exclusions, and the need for expert advice.

Read the article.




Farrell Fritz Welcomes Jay Sawczak, Construction Law Associate

Jay Sawczak has joined Farrell Fritz’ commercial litigation practice group as an associate. He concentrates his practice in construction law.

Prior to joining Farrell Fritz, Sawczaks, a Hoboken, NJ resident, was general counsel at JRM Construction Management, LLC in New York, NY. He was general counsel and a contract negotiation associate at Ocean Pacific Interiors (New York). He also worked at the Community and Transactional Legal Clinic (Newark, NJ).

Sawczak is admitted in New York State.

He earned his J.D. from Rutgers Law School and his B.S. from the University of Vermont.



Business With a Friend: Lessons from a Liftboat Contract

Charles Sartain, a partner in Gray Reed, uses a recent 5th Circuit ruling on a liftboat construction contract to illustrate his advice on how to administer and perform a contract, especially one with a friend.

Writing in the firm’s Energy & the Law blog, he discusses Semco, LLC v. The Grand, LTD. The case involves a $15.9 million contract between long-time friends to construct a liftboat, a construction project that involved numerous change orders.

“At some point, the parties ‘got away from the change order program’ and informal requests were approved by email or orally,” Sartain explains. Then allegations of fraud were raised.

Read the article.


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Construction Contracts, Third Party Claims and Tort Law Liability

Carl R. Pebworth, a partner in Faegre Baker Daniels, asks and answers the question: What tort obligations does a design professional on a construction project owe to non-parties — like, for example, the persons who will use what has been designed after it is built?

he discusses an Illinois case in which a court addressed whether an engineer who had contracted to design a “replacement” for a bridge deck had a professional obligation to “improve” the bridge deck after it failed and third-party motorists were killed.

“As long as the design professional sticks to what the designer has contracted to do and does that work professionally, the designer cannot be obligated to go beyond those duties,” Pebworth writes.

Read the article.


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2017 AIA Contract Documents Update

Cozen O’Connor has published an update that reviews the new construction contract documents adopted by the American Institute of Architects (AIA).

” In 2017, AIA updated some of its core documents, including the A102 (Standard Form Agreement Between Owner and Contractor), A201 (General Conditions of the Contract for Construction), and B101 (Standard Form Agreement Between Owner and Architect), among others,” the client alert states.

“Because of the widespread use of these forms on construction projects, it is important for industry professionals to be aware of the 2017 revisions to allow for efficient review and finalization of contract documents without running the risk of overlooking a critical change.”

Read the article.



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Fast and (Sometimes) Furious: Acceleration and Compensability in Construction Contracts

Brian L. Lynch, writing for Faegre Baker Daniels, discusses the principle of acceleration in construction contracts.

A major consideration in acceleration clauses is whether the contractor is getting for the speed up in work. He covers the three types of acceleration, which usuall dictate whether the contractor is being compensated for additional costs related t the disruption.

In three sections of the article, Lynch discusses directed acceleration, constructive acceleration, and voluntary acceleration.

Read the article.


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Liquidated Damage Provisions – A Good Idea or an Unenforceable Penalty?

A post by Joshua M. Pellant of Faegre Baker Daniels discusses the use of  a provision for a stipulated or “liquidated” damage amount in the event of specified contract breaches in construction contracts.

“These provisions can be an effective tool to recover losses that otherwise may go uncompensated because they cannot be proven or because the damages are not recoverable under an ordinary contract,” he explains. “However, courts generally will not enforce a liquidated damage provision that is seen as a ‘penalty’ unrelated to any anticipated or actual loss. The question, then, is whether a particular contract provision will be interpreted as an enforceable liquidated damages provision or an unenforceable contractual penalty.”

He discusses general enforceability standards and how much is too much (or not enough).

Read the article.


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Construction Contracts and Arbitration Provisions: Is the Word “May” Mandatory? Maybe!

According to some courts, the traditional line of reasoning in defining “may” versus “shall” is no longer the trend in the context of arbitration provision in construction contracts, writes Matthew DeVries in Best Practices Construction Law.

Traditionally, the use of “may” could be interpreted as making performance permissive or optional, while “shall” makes performance mandatory.

DeVries cities a case in which the Supreme Court of Virginia held that the parties’ use of the word “may” in the dispute resolution provisions of their construction contract required mandatory participation in arbitration at the election of one of the parties.

Read the article.


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Should I Have an Arbitration Clause in My Construction Contract?

Although it is typical for AIA form contracts to contain arbitration clauses, as a contractor you should consider whether you should have an arbitration clause in your construction agreement, advises Paul W. Norris of Stark & Stark.

In an article posted on the New Jersey Law Blog, Norris explains “there are numerous factors to consider in determining whether mandatory arbitration is the preferred dispute resolution mechanism, or whether the state court system is preferred. Although arbitration may have some advantages, there are also disadvantages which must be considered rather than simply adopting the AIA form.”

He discusses the cost of the arbitration proceeding, judge or jury vs. an arbitrator, discovery during an arbitration process vs. the state court process, timeliness of the proceeding, judgments, and appeals from arbitration of a state court.

Read the article.


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Unsigned Contract = No Proper Insurance Coverage

Commonsense Construction Law reports on a case in which an unsigned contract meant that the contractual liability exclusion in the subcontractor’s insurance policy would control, since there was no obligation “assumed in a contract or agreement . . . [where the claim] occurs subsequent to the execution of the contract or agreement.”

Stan Martin wrote the article.

“And this was not just a matter of having an agreed contract form which the parties never got around to signing,” he explains. “The subcontract at issue stated that it ‘is not valid without the Subcontractor General Conditions Version 2012-003 signed and agreed to by all parties.’ There was no dispute that the parties had not signed the general conditions.”

Read the article.


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The Dumbest Class Action Claim Ever

The Milwaukee Journal Sentinel reports on a pair of class-action lawsuits against Home Depot and Menards that Above the Law calls “the dumbest class action claim ever.”

As Journal Sentinel reporter  explains:

Menards and Home Depot stand accused of deceiving the lumber-buying public, specifically, buyers of 4×4 boards, the big brother to the ubiquitous 2×4.

The alleged deception: The retailers market and sell the hefty lumber as 4x4s without specifying that the boards actually measure 3½ inches by 3½ inches.

Above the Law’s Joe Patrice explains that everybody who ever built anything already knew that 3½ by 3½ is the industry standard:

In fact, if retailers started selling boards that were 4 inches by 4 inches, they’d actually be useless because they wouldn’t match up with all the other standardized materials that assume the board will be 3 1/2″ by 3 1/2″.

Read the Journal Sentinel and Above the Law articles.


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Foley Adds Construction Attorney Lisa Glahn in Boston

Lisa Glahn has joined Foley & Lardner LLP’s Construction Practice as a partner in the Boston office.

Glahn’s practice focuses on construction, real estate and project development, where she counsels on strategic deal structuring, contract formation, complex litigation and claims resolution, among other issues. She represents clients in both the public and private sectors, including contractors, developers, lenders and owners through all project phases.

“Lisa has a versatile practice and can offer services from the transactional commencement of a project until the last dispute is resolved in litigation,” said Jeffrey Blease, chair of Foley’s Construction Practice. “She’s particularly adept at litigating and managing trial teams on complex, high-stakes projects that involve multiple parties.”

In a news release, the firm said:

Glahn has successfully handled construction litigation cases and disputes related to waste-to-energy and EPC projects, design-build ventures, and hospital, university, real estate and transportation development projects. On the transactional side, she drafts and negotiates general contracts, subcontracts, consultant agreements, construction management agreements, development agreements and other project related documents.

“Lisa has the judgment and experience to handle the most complex construction issues, of which there are many across Boston’s burgeoning industries and real estate market,” said Susan Pravda, managing partner of Foley’s Boston office. “In addition to the excellent service she provides to clients, Lisa regularly lends her professional skills to the local community and supports organizations that promote the greater good.”

From 2004 to 2005, Glahn worked as a special assistant district attorney with the Middlesex District Attorney’s Office, where she tried more than 30 cases and advocated for social justice and human rights on behalf of underrepresented and marginalized constituencies. She serves on the board of the non-profit organization Women in Construction, and is a former board member of the National Association of Women in Construction – Boston Chapter. Lisa is also a member of the American Bar Association, Massachusetts Bar Association and Women’s Bar Association.

Prior to joining Foley, Glahn was a member at Mintz Levin.


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