A Baker Tilly on-demand webinar provides an overview of strategies to identify potential claims scenarios and potential resolutions available to mitigate claims.

“Conflict and disagreements are normal on construction projects; however, when everyday disagreements escalate into unresolvable issues, claims and disputes may result,” the firm says on its site. “These can lead to costly and time consuming distractions for your organization and your project.”

Learning objectives:

• Understand red flags associated with high-risk projects
• Learn characteristics of a culture of claims avoidance
• Learn contractual methods/provisions that can help to proactively avoid disputes
• Understand remedies not requiring legal action

Watch the on-demand video.

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While both relatively simple concepts, allowances and contingencies are often confused with one another. Conflating the two can lead to pitfalls, warn Randolph E. Ruff and Jonathan M. Mraunac of Ogletree Deakins.

“An easy way to remind oneself of the difference is: allowances are for known unknowns, and contingencies are for unknown unknowns,” they write.

In their article, they explain the differences between allowances and contingencies, how they are used, and how they can be drafted.

Read the article.

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The American Institute of Architects has released several revised documents including the primary agreements between the owner and contractor and the owner and architect, reports Dickinson Wright PLLC.

The article on the firm’s website explains that any of the revisions are attempts to clarify existing provisions. A number of changes, however, are more significant.

The update covers general conditions of the contract for construction, such as building information modeling and digital data, evidence of owners’ financial arrangements and minor changes in the work.

It also discusses agreements between the owner and the contract, including assumptions, contractor progress payments and owner termination.

Topics also include the agreement between the owner and arthitect.

Read the article.

In construction law, general contractors have largely negotiated a shift in the distribution of risk away from the general contractor and to the subcontractor with the inclusion of “pay-if-paid” contractual clauses,” writes Dana Chaaban in Shutts & Bowen’s Construction Law Blog.

Writing for the Florida firm, Chaaban explains that such clauses make the general contractor’s receipt of payment from the owner a condition precedent to the general contractor’s ultimate payment to the subcontractors. Absent such a provision, general contractors bear the risk of an owner’s potential insolvency.

Subcontractors have sought to circumvent contractual “pay-if-paid” provisions by bringing claims against both the general contractors and their sureties who may guarantee payment.

Chaaban discusses some cases on the subject.

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When negotiating a construction contract with a general contractor, the owner/developer should be aware of, and address, a number of issues to attempt to mitigate or limit the risk of construction defect litigation for a residential project, including multi-family and for-rent residential apartment and senior housing projects, advises Rebecca W. Dow in Holland & Hart’s Construction Law Blog.

She explains that tandard forms of construction contract — such as the American Institute of Architects (AIA) or ConsensusDocs — are more beneficial to the contractor than the owner in many respects.

A construction contract will need to be reviewed thoroughly and revised to better protect the owner, and in the case of residential construction, should in particular, address 10 key issues.

She discusses those issues, which include: scope of work, change orders, indemnification, warranties, subcontracts, insurance, dispute resolution, compliance with laws/environmental matters, construction lender, damages/attorneys’ fees.

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In his Petes’ Take blog for  Porzio, Bromberg & Newman,  Peter J. Gallagher describes a New Jersey case in which a court ruled that a clear arbitration provision, negotiated by a sophisticated party while represented by counsel, is enforceable.

In Columbus Circle NJ LLC v. Island Construction Co., LLC, the appellate court held that the arbitration provision in the AIA contract used in this case satisfied the requirements to explain to the signer the possible consequences of giving up the right to adjudication in a court of law, Gallagher explains.

“By its terms, the provision required plaintiff to choose between arbitration and ‘litigation in a court of competent jurisdiction,’ therefore, when plaintiff chose ‘arbitration,’ it did so ‘with full knowledge that arbitration [was] a substitute for the right to have [its] claim adjudicated in court.’ Moreover, the Appellate Division noted that neither the LLC nor its sole member was ‘an average member of the public,'” according to Gallagher.

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Many construction lawyers who specialize in transactional work acknowledge that they do not spend much time considering or negotiating the arbitration clauses in construction contracts, points out
Patricia H. Thompson in a post on the website of JAMS.

She addresses the question: Should an arbitration clause be just a boilerplate provision, taken “off the shelf,” or should it be specifically negotiated and crafted for the particular construction project and to accommodate the parties’ requirements?

The post lists some of the major questions to consider, such as: Should arbitration be mandatory or permissive? Should there be one or three arbitrators, should they all be neutral, and should they have particular qualifications or professional expertise? Should the arbitrator’s power be broader or more limited than otherwise provided by relevant statutes or rules?

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In his Commonsense Construction Law blog, Stan Martin asks the question “How do additional insured obligations work with subcontract flow-down clauses.” And he answers it with one word: “They don’t.”

“Unless the subcontract is carefully drafted, that is. So where the prime contract required the owner to be named as an additional insured, and the subcontract flow-down clause passed along the GC’s obligations to the owner, as the sub’s obligations to the GC, this did not by itself result in a requirement that the sub name the owner as an additional insured. That is one lesson from a New York court decision,” Martin explains.

He discusses Navigators Ins. Co. v Merchants Mut. Ins. Co. at length and concludes with two lessons to be learned.

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Because there are often multiple causes of delays and a variety of types of delay damages on construction projects, it is critical that the parties consider and properly allocate the risk of such delays and the potential resulting costs in the contract documents, advises Robinson+Cole.

Elizabeth Wright explains that the Massachusetts case of Cumberland Farms, Inc. v. Tenacity Constr., Inc. offers insight into the importance of the contract in allocating the risk of delay damages.

“In this case, the court noted that the contract not only provided that the contractor is only entitled to an extension of time for delay damages but it also expressly provided that the contractor would only be entitled to time and material costs for Winter condition work,” she writes.

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When a contractor on a project files a bankruptcy case, the property owner and subcontractors have some serious decisions to make, writes   Tracy Green in the California Construction Law Blog.

The blog is a publication of Wendel Rosen Black & Dean LLP.

When a party to a contract files bankruptcy, the other party’s actions are constrained by the bankruptcy code, Green explains.

The article covers the types of bankruptcies involved, benefits of bankruptcy for the debtor, benefits of bankruptcy for the creditor, executory contracts, liens and bonds, getting the work done, preferences, and doing business with a distressed contractor.

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Many legal battles in the construction industry revolve around contract interpretation disputes. Care in contract drafting is a valuable way to avoid disputes, writes Michael Wilson in Greensfelder, Hemker & Gale’s Construction Law Blog.

“A fundamental principle of contract interpretation is to ascertain and give effect to the parties’ objectively expressed intent. What a party was trying to say, without accurately expressing it, does not count. Contract terms are usually given their ordinary (i.e., dictionary) meaning unless the contract specially defines them or the industry has adopted a special meaning known to both parties,” Wilson writes.

In his article, he discusses at length the principle of identifying and interpreting ambiguity, and the tools that can be used to improve a contract.

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Much Shelist, P.C. has published an article reviewing the three most commonly used payment mechanisms in construction contracts and the benefits and drawbacks of each.

David A. Eisenberg discusses at length the benefits and drawbacks of fixed price, or lump sum payments, which he calls “perhaps the simplest and most commonly used payment mechanism.” Then he examines cost-plus contracts, in which the owner agrees to pay the contractor for its actual costs incurred in performing the work, plus a predetermined fee.

Finally, the covers the guaranteed maximum price, in which the owner is responsible for paying the contractor’s costs up to a certain cap. It is essentially a cost-plus contract with a cap.

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Peter C. Vilmos of Burr Forman writes in an article published by JDSupra Business Advisor that contractors have several reasons to require that their high-level employees (e.g., C-Level) enter non-compete agreements.

“Non-compete agreements, or non-competition agreements, are contracts into which an employer and an employee enter that restricts the work the employee can perform for another company when the employee’s tenure at the employer company ends,” Vilmos explains. “Typically, it’s illegal to intentionally restrain trade; however, some states allow employers and employees to voluntarily enter into agreements with future employment restrictions.”

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Delays are an all too common occurrence on construction projects. And they almost always cost money, points out Eugene Polyak on the website of Smith, Currie & Hancock LLP. So who pays for the increased costs caused by delays?

“This is one of the most durable issues in all of construction contract law. The answer is — it depends,” writes Polyak. “It depends first on whether the risk of delay is addressed in the parties’ contract. Owners and contractors frequently use No Damage for Delay clauses to push down the risk of delay costs. It may also depend on the law of the state where the project is performed. No Damage for Delay clauses are not uniformly enforced in different jurisdictions.”

He gives some examples of no-damage-for-delay clauses and discusses some exceptions.

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It’s important for parties entering into any significant economic transaction to have written contracts. This is especially true for construction projects which are, by their nature, complicated, writes Jason T. Strickland for Ward and Smith, P.A.

A contract on a construction project sets forth the parties’ obligations to each other and determines how risks will be shared or divided on the project.

Strickland explains the value of having a written construction contract, rather than simply an oral agreement. Then he discusses risk shifting, parties to a construction contract, key elements of a construction contract, consistency, flow down and tiers, and industry forms.

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Veteran trial lawyer Jay Old has joined commercial litigation firm Hicks Thomas LLP where he will continue to represent construction, insurance, petrochemical and health care companies as part of his client portfolio.

Old’s addition will add offices in Austin and Beaumont. Old joined the firm effective Jan. 1.

“We are thrilled to be adding Jay and his team. He’s an exceptional lawyer with an outstanding track record,” said John B. Thomas, name partner and firm co-founder. “Many of us have known Jay for years, dating back to our days together at Andrews Kurth.”

Old’s clients include refineries, construction contractors, manufacturers, hospital systems and insurers. Joining him is labor and employment lawyer Jim Henges, along with four other lawyers from Old’s firm.

“I like to say I represent the job creators,” Old said. “I’m very excited to be joining the Hicks Thomas team, and hope to add to its reputation as a premier trial firm.”

Old is a frequent speaker at continuing education programs for lawyers across the country. He also is a former president of the Texas Association of Defense Counsel and has chaired the Construction Law Section of the State Bar of Texas.

He has defended national clients in statewide and regional mass tort litigation, in toxic torts, construction and product liability cases. He also successfully defended insurance companies in a series of high-profile trials involving hailstorm claims in Galveston and elsewhere.

Old is Board Certified in Personal Injury Trial Law by the Texas Board of Legal Specialization and has been recognized on the Texas Super Lawyers list every year since 2005. A native of Beaumont, he is a graduate of Texas A&M University and the Texas Tech University School of Law.

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All parties involved with a construction contract need to explore which dispute resolution option is right for them and the project, and also ensure their contract terms are as clear as possible to avoid potential problems down the road, writes Kim Slowey in Construction Dive.

In her article, Slowey covers mediation, arbitration vs. litigation, and the importance of planning.

She quotes Margaret Greene, partner and leader of the construction planning practice group at Honigman Miller Schwartz and Cohn in Detroit, who counsels that perhaps the most important aspect of dispute resolution is to minimize the chance of conflict before disagreements rise to the level of “disputes” or “claims.”

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When a party breaches a contract and the contract does not contain a valid liquidated damages clause, the non-breaching party may be entitled to compensatory damages. Charles B. Jimerson and Kayla A. Haines of Jimerson & Cobb, P.A. explain that the appropriate measure of damages arising from a breach of an enforceable contract is usually “the difference between the value expected from the contract and the value actually received by the non-breaching party.”

In their article, they write: “Many factors can impact the recoverability of consequential damages, such as common law implied warranties, or indemnity provisions. Therefore, when entering into a construction contract, parties should carefully evaluate the proposed contract language to fully comprehend the risks they are about to assume. In order to prevent any extensive consequential damages that might result from a construction project, parties should use whatever power they may have while creating their contract to predestine certain expenses that a party would incur in the event of pervasive defects or significant project delays.”

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The latest installment of Construction Dive’s “The Dotted Line” series discusses a problem many construction contractors see in their business: misinterpretation of terms in their contracts.

Writer Kim Slowey covers five of the most common sources of this misinterpretation, with input for experts.

“Most construction contractors follow custom and standard practice in the industry, or what they’ve always done in the past,” said Chicago attorney Matthew Horn, a long-time construction law attorney and founder of Legal Services Link.

The article discusses incorporation clauses, pay-if-pay versus pay-when-paid, Change orders and extras must be in writing to obtain payment, indemnify versus defend, and mechanics’ liens.

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When a client wants to pursue a lawsuit or arbitration, one of the first things an attorney should do is determine whether the statute of limitations has run on the client’s claim, advise Darren Rowles and Scott Cahalan in a post for  Smith, Gambrell & Russell, LLP’s Construction Law blog.

“Many people are not aware, however, that parties to contracts, including construction contracts, may have the ability to increase the statute of limitations for a written contract by a factor of more than three hundred percent just by adding a few words to make their contracts ‘under seal.’ As a result, these people may increase their exposure to breach of contract/warranty claims without knowing they are doing so,” according to their post.

They explain that, in Georgia, for example, a written contract that is not for the sale of goods would normally have a six-year statute of limitations measured from the date of breach, But a contract signed “under seal,” has a statute of limitations of 20 years from the date of breach.

Read the article.