When conditions are encountered on a construction project that are contrary to the information provided to bidders, the parties’ contract should provide a roadmap for how the parties ought to proceed, writes Timothy W. Gordon, a partner in Holland & Hart, in an article published on Lexology.com. When the parties’ contract is silent on the issue, the price of contracting increases, uncertainty arises, and the likelihood of disputes increases.

His article includes sections titled:

• Why Have A Differing Site Conditions Clause?
• What If There Is No Differing Site Conditions Clause?
• What About Public Projects?
• What About Exculpatory Clauses?

Read the article.

Most contracts in the construction industry supply chain require the “downstream” project participant to indemnify those “upstream” against a spectrum of losses or claims relating to the project, write Shawn M. Doorhy and Patrick J. O’Connor, Jr. on the website of Faegre Baker Daniels LLP.

“Upstream participants, such as owners and general contractors, naturally seek the broadest indemnity available under the circumstances. It is not uncommon for owners and general contractors to draft broad indemnity agreements seeking protection from loss due to the indemnitee’s own direct fault,” they write. “Whether this can be successfully accomplished depends on a number of factors, including the specific language used and the law of the applicable jurisdiction.”

They add that — because indemnity agreements often are strictly construed against the party seeking indemnification — careful drafting is especially important.

Read the article.

Waivers of consequential damages have become the industry standard in construction projects, and these clauses are found in most industry templates, writes Gregory Faulkner in Robinson+Cole’s blog, Construction Law Zone.

“No contractor wants to accept the risk that any one breach could lead to the financial ruin of its company,” he writes. “But does this clause, and others like it, go too far in the other direction?”

“Neither party should rely blindly on standard industry forms to define what losses are recoverable in the event of breach.  A project owner should analyze its potential exposures as part of its overall business plan for the project,” Faulkner writes.

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Good attorneys constantly evolve their contract provisions, but contract evolution hates to discard pieces that were once useful, writes J. Benjamin Patrick of Gordon & Rees LLP in an article published on Lexology.com. The tendency to keep these pieces can result in a contract having the equivalent of the human appendix: a piece no longer of any positive use and that harbors the potential for harm.

For example, outdated contract provisions linger in the “standard form” contracts used by many contractors and owners, he writes. “The presence of such a provision in your standard contract is a sign that some additional evolution is necessary in order to bring your contract up to current laws, standards, and industry practices.”

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Savvy owners – especially those with experience in litigation – know the importance of avoiding the growing variety of clauses that limit liability for construction industry vendors, writes Eric A. Grasberger of Stoel Rives LLP. Likewise, general contractors and architects need to be on guard against sub-tier liability waivers often lurking in the fine print or at the end of lengthy proposals.

“Owners are optimists and contractors are negotiators,” he writes. “Maybe this explains the increasing (and for owners, disturbing) presence of liability waivers in construction and design contracts.”

He discusses some of the clauses that should be considered carefully, including the consequential damages (CD) waiver, the limitation of liability (LOL), the warranty illusion, and options.

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James Waite, writing in Rental Management Magazine, addresses the problem equipment rental operators can face when a large customer wants to revise a contract or use their own.

“This is fairly commonplace when dealing with larger customers, particularly schools, governmental entities and some contractors,” he writes. “Importantly, there is no ‘established’ set of rules for dealing with these issues, making it difficult for rental operators to know whether they’re accepting merely ‘industry standard’ modifications or instead, assuming potentially catastrophic liabilities.”

He offers a list of provisions that operators should insist on retaining and another list of provisions that should be rejected.

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Failure to follow contractor licensing laws can have draconian consequences, writes Kraftson Caudle of Virginia on its blog.

“In California, for example, if a contractor is not licensed at all times while performing work, which includes bid submittal, then
the contractor is not entitled to any future payment and forfeits all prior payment,” the firm writes.

“In some states, like Virginia, a contractor’s good faith effort to comply with the licensing law is a factor
in determining whether that contractor may recover in equity,” the article continues.

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An article by Adam Groff in Global Construction gives some advice on what construction companies need to remember when drawing up a contract.

The article features sections headed “Construction Contracts: A Changing Landscape,” “Common Contracts in Construction,” “Union Contracts” and “Hiring Types.”

“If you work in the construction industry, then you already know how important contracts are,” he writes. “Although construction contracts have changed over the years, there are still some basic guidelines to follow when creating a contract.”

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A generation ago, mediation of construction disputes was unusual, writes Bruce W. Ficken in Pepper Hamilton’s Constructlaw blog. Today, it is rare that a construction claim goes to trial without some effort at mediation first. Indeed, a substantial percentage of construction contracts require mediation as a precondition to filing suit or demanded arbitration.

“Still, as pervasive as mediation has become, misperceptions about mediation persist among the contractor population generally.

“What does a mediator decide? Who controls the proceedings? Is there such a thing as binding mediation? How confidential is confidential during and after a mediation?”

The author addresses those questions in the article.

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Matthew J. DeVries of Burr & Forman offers a few items to think about when drafting contracts, relying on a book titled “Courses on Drafting Contracts.” 

He quotes author and business attorney Peter Siviglia when he writes, “the contract will help define: (1) a transaction, such as the purchase of real estate; (2) a relationship, such as a partnership, or (3) a combination of both, such as a partnership to purchase and develop real estate.”

Other subjects include “A contract is a set of instructions,” and “A contract should include standard provisions.”

Read the article in Lexology.

Pillsbury Winthrop Shaw Pittman has posted an article about the American Arbitration Association’s revised Construction Industry Arbitration Rules and Mediation Procedures which became effective July 1, 2015.

George Haley, John Heisse, Clark Thiel and Robert Thum write that, although some changes are relatively modest, others expand the powers of the arbitrator and may alter traditional assumptions underlying the selection of arbitration as a dispute resolution process for construction projects.

“For example, the Rules now provide a procedure for emergency relief that may result in more mid-project disputes being taken to arbitration or court, as the new Rule R-39 provides a party can seek emergency relief from either the AAA or a court, without violating the agreement to arbitrate,” they write.

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Not all construction contracts are written, and contractors don’t always provide a written policy at the end of a project, writes Austin B. Calhoun of Florida-based Jimerson & Cobb. This raises the question: are oral multi-year warranties enforceable?

The article discusses a case involving Florida’s Statute of Frauds, which bars the enforcement of oral agreements that are not to be performed within one year. But Loper v. Weather Shield Mfg., a recent Florida First District Court of Appeals case, appears to have opened the door to enforcing oral multi-year warranties.

The article focuses on the Loper holding, as it applies to the Statute of Frauds and oral warranties for more than one year.

Read the article on Lexology.com.

Farrell Fritz partner Jason S. Samuels was recently appointed Chair of the Nassau County Bar Association’s (NCBA) Construction Law Committee. He will serve a two year term.

Samuels, a Roslyn Heights, NY, resident, concentrates his practice in construction law. He represents contractors, owners and developers in a variety of matters. He earned his J.D. degree from Hofstra University School of Law and his B.A. degree from the State University of New York at Albany.

The Construction Law Committee is a forum for the discussion of construction-related topics.

When allocating risk inherent in a construction project, it is necessary to pay close attention to the interplay between indemnity and insurance to ensure the objectives of the parties are achieved, writes Jeffrey A. Kiburtz of Pillsbury Winthrop Shaw Pittman in a paper published in Lexology.

He writes that each has its advantages and limitations, but can effectively be combined to secure the performance of the myriad participants in construction projects of all complexities.

The paper covers the varying scopes of protection, the timing of performance, and the likelihood of performance.

Read the article.

A Texas federal judge handed down a $663 million judgment Tuesday against Trinity Industries, the guardrail maker accused of producing a faulty product that can jam and spear through vehicles, reports The New York Times.

The ruling in the court of Judge Rodney Gilstrap of United States District Court is the latest stage of a whistle-blower case filed by Josh Harman, a competitor. Harman said he discovered in 2011 that Trinity had made a critical change to the dimensions of its ET-Plus guardrail in 2005, but failed to tell federal regulators as required by law.

“The jury found the company liable for defrauding the Federal Highway Administration and awarded $175 million, which, under the False Claims Act, was tripled to $525 million.” The Times reports. Added-0n penalties brought the judgment up to $663 million.

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A free on-demand webinar posted by Baker Tilly discusses the finer points of dealing with change orders in construction projects.

The webinar helps participants learn how to identify change orders, learn how to decompose a change order, determine the underlying change order driver, understand the risk associated with different types of change orders, and develop strategies for auditing change orders and managing construction professionals.

The presenter is Tony Ollmann, CPA, CCA, Director, Baker Tilly.

Watch the on-demand presentation or download the presentation slides.

Performance-based contracting received a boost this month when the Government Accountability Office found that the U.S. Department of Transportation is making progress in moving toward a national performance-based approach, reports Forbes.

In Moving Ahead for Progress in the 21^st Century (MAP-21), the DOT recognized the importance of a more progressive approach in the way federal agencies and states do business with each other, with planning organizations and with private vendors.

Accordinng to the Forbes report, in the fiscal year 2013, DOT provided about $50 billion to states and other “grantees” — such as metropolitan planning organizations and transit agencies — to support highway and transit infrastructure and safety.

Read the story.

Jennifer Horn and Maria Panichelli presented the second webinar in their core construction curriculum series for Women Impacting Public Policy and Give Me 5%.

The free on-demand presentation, titled “Best Practices in Construction,” covers suggested best practices for before, during and after conclusion of a construction project, in the context of both state and federal contracts, the presenters say.

The presentation provides tips on contracting, documentation, compliance and claims prevention strategies.

Watch the on-demand webinar now.

Baker Tilly presents a complimentary on-demand webinar discussing how to analyze an engineer-procure-construct contract for risk and plan to audit EPC projects.

The list of objectives for the webinar begins with understanding the fundamental delivery differences betweenEngineer-Procure-Construct (EPC) and Architect-Procure-Construction (APC).

Other objectives include: how to learn to identify the unique contract audit risks of EPC, and how to learn to identify EPC contract audit red flags.

Watch the on-demand webinar and download the slides.

Baker Tilly hosts a complimentary on-demand webinar on how to analyze a contract for project risk and learn how to develop a risk mitigation plan.

The webinar includes a case study review of guarantee maximum price, stipulated sum, and unit priced contracts.

Topics also include: What a contract risk analysis is, decomposing a contract, contract assessment red flags, and refining contract content.

On its website, Baker Tilly says learning objectives include gaining the ability to assess a contract for risk, recognize unfavorable contract provisions, uncover contract omissions, and identify project controls or actions to help mitigate construction project risk.

Watch the webinar and download the slides.