Jeffrey M. Reichard of Nexsen Pruet offers a reminder that the American Institute of Architects (AIA) will discontinue support of older versions of its most popular standard form contracts after Oct. 31, 2018.

“This means you will no longer be able to create, edit or even finalize a 2007 AIA document after that date,” he warns. “If you haven’t already done so, now is the time to convert your standard form contracts to the 2017 versions.”

He writes that one important change is the creation of a new insurance exhibit which changes and expands the terms related to insurance coverage previously included in the body of the A201.

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One area where the distinction between written versus unwritten agreements makes a difference is in the calculation of the statute of limitations, points out Christopher G. Hill in his Construction Law Musings blog.

Virginia’s 5- year statute of limitations for written contracts — compared to the 3-year statute unwritten contracts — came into play in  M&C Hauling & Constr. Inc. v. Wilbur Hale in the Fairfax, Virginia Circuit Court.

M&C provided hauling services to the defendant through a subcontract with Hauling Unlimited. No separate written contract between M&C and Hauling Unlimited or Hale existed. Hauling Unlimited filed a plea in bar to have the matter dismissed as being brought beyond the 3-year statute and argued that no signed or other written contract existed.

“The Court determined that Hauling Unlimited and Mr. Hale assented to M&C’s terms and did not insist on a signature to make their contract a written one,” writes Hill.

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A podcast posted by Pepper Hamilton discusses the definition of fixed-price contracts and cases in which the audit provision in the contract has been unsuccessfully used to assert claims for reimbursement and False Claims Act liability.

“Fixed-price contracts are well-known among contractors,” the firm says on its website. “These agreements seem simple — they do not allow the contract price to be modified after the award unless the parties expressly agree. But is it really that simple? In reality, there is very little case law guiding the practical approach to these types of contracts.”

In the podcast, Marion Hack, a partner in Pepper’s Construction Practice Group, discusses these types of contracts.

Listen to the podcast.

On construction projects, owners and developers often are familiar with standard contract language and provisions, but the industry is continually evolving, according to a paper published by Zetlin & De Chiara LLP.

The paper discusses 10 key contract provisions and tips to help parties avoid pitfalls.

Those areas include scope of work, compliance with schedule, meeting the owner’s target for the budget, contingency, changes in the work, indemnification, insurance, dispute resolution, general conditions, and subcontract issues.

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“Pay when paid” clauses are common in the construction industry, according to Bradley Arant Boult Cummings, but courts generally disfavor conditions precedent (an event that must occur before another party’s performance is due) and will not observe their existence unless they are unambiguously laid out in the contract.

The article, published by JD Supra, states that “subcontractors and general contractors should be aware that if language in a contract clearly establishes that the prime contractor is only obligated to pay the subcontractor if the owner pays the prime contractor for that work, and the contract states that the subcontractor is taking the risk of the owner’s potential insolvency, then courts are likely to enforce the contract as written—condition precedent and all. This language establishes what is known as a pay if paid clause.”

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Form 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.

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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.

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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.

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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.

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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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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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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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There are six questions that an owner can ask to evaluate what rights and obligations it will have upon entering into a construction contract, writes Daniel Bradfield, a partner in Arnall Golden Gregory LLP.

“Quite often owners simply verify the economic terms for the project, set a completion date, possibly include references to drawings or plans, and then sign a construction contract with little regard to the various provisions that will impact the amount of leverage available in the event a problem occurs with the project,” Bradfield writes in the article.

He discusses the six questions:

• What is being signed?
• What actions can an owner take if the contractor does not finish the work on time?
• What does the contractor need to provide the owner in order to receive payment?
• How are disputes to be resolved?
• What does the owner owe the contractor if the owner terminates the construction contract?
• What, if any, roles will the architect play in the project under the terms of the construction contract?

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Owners who are dissatisfied with their contractors’ performance increasingly assert fraud-based claims in addition to breach of contract claims because fraud-based claims are not typically barred by contractual waivers and limits of liability, according to a client alert published by Pepper Hamilton.

“Fraud-based claims may also create the potential for punitive damages in addition to compensatory damages,” wrote the authors, Ralph A. Finizio, Robert A. Gallagher and Jane Fox Lehman. “Contractors and their counsel, however, can limit their potential exposure for fraud-based claims through careful contract drafting and thoughtful selection of the law to be applied to disputes.”

They wrote that contractors should first consider: the codified law of the jurisdiction where the project is to be built, statutes that regulate the availability of punitive damages, and differences in common law.

“Contractors should also keep in mind that their choice of law will likely impact the conduct and cost of any litigation, as well as the best choice of outside counsel to handle the matter,” they wrote.

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Construction contracts are often such voluminous documents that it can be difficult for owners to recognize and adequately negotiate the key terms that play the largest role in how construction risk and costs are allocated, writes Mike Madigan in Kegler, Brown, Hill + Ritter‘s Ohio Construction Law blog.

In the article, he considers 10 questions owners should ask themselves before signing a contract with a contractor for a commercial project.

A few of those questions are: Is there a consequential damages waiver? Is there a liquidated damages provision? Is the contractor required to provide a performance and payment bond? What costs are recoverable by the contractor under a termination for convenience?and has the contract been coordinated with the requirements of the lending institution?

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The Court of Appeals in North Carolina recently confronted the question of what happens when a contractor and subcontractor, having gone back and forth on a few contract terms while the sub is performing work, reach the end of the project – or at least the end of the sub’s work – without an agreed contract form. Stan Martin discussed the issue in a recent article posted on Commonsense Construction Law’s blog.

“Parties who allow the schedule to control performance without resolving the paperwork could find themselves in a mess, particularly if the back-and-forth on contract terms never stops,” Martin writes. “The sub is unhappy about not being paid, and the GC is unhappy about what it perceives to be a less-than-friendly forum. (Or maybe the GC simply wants the sub to bear the inconvenience of the 100-mile or so trip between counties.) And the court will have to sort out the mess, at a greater cost than either party wants.”

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Before entering into a construction contract, consider how force majeure events are evolving in today’s world, advise Jonathan Massell and David A. Senter of Nexsen Pruet on the firm’s website.

“In construction contracts, force majeure clauses include events such as “riots” and “acts of war” but courts have found that acts of terrorism did not fit those descriptions,” they write. “After the September 11th attacks, clauses utilizing “acts of terrorism” became more common, but courts have not directly interpreted the phrase and it has not been scrutinized judicially.”

Read the article.