Volume: 21, Issue: 5 - 03/15/2023
A dispute between two parties on a construction project can quickly involve three or more parties. These multi-party disputes generally involve common or interrelated factual questions. Ideally, all the parties should be brought together in a single forum; however, this frequently doesn’t happen. To what extent should rulings or findings in one forum be binding on other parties that did not participate in that proceeding?
A subcontractor filed a mechanic’s lien on the project owner’s property. The owner challenged the validity of the lien on the grounds no money was owed under the prime contract. A trial court found that when proper credits were applied, no money was owed. The Connecticut Supreme Court was asked whether that determination should be binding on the prime contractor, who was pursuing a separate action against the owner.
The second case in this issue addresses a procedural aspect of federal contract claims. Technical in nature, the situation arises frequently. A contractor’s claim for an equitable price adjustment under the contract was denied by the government contracting officer. Could the contractor sue the agency in the Court of Federal Claims without first submitting another claim to the contracting officer alleging breach of contract?
The third case involves a contractor’s submission of a proposed scope of work at a stated price schedule to a private project owner. The owner gave the contractor a check as a “down payment.” Was a contract formed, allowing the owner to reject any contractor requests for changed or additional work?
Litigation between a project owner and subcontractor/lienor determined there was no balance due under the prime contract; however, there was no presumption that this ruling was binding on the prime contractor. The contractor was therefore entitled to pursue it mechanic’s lien foreclosure suit against the owner.
When a contractor’s claim for an equitable adjustment under the contract is denied, the contractor need not submit a second claim alleging that wrongful denial was a breach of contract. The contractor may take the breach of contract suit directly to the Court of Federal Claims.
A contractor’s written proposal for stated elements of site work at a stipulated schedule of prices was an offer. The project owner accepted that offer when it wrote the contractor a check as a “down payment.” A binding contract had been formed and the owner was under no obligation to accept any change orders proposed by the contractor.
Volume: 21, Issue: 4 - 03/01/2023
The documentation of a construction agreement can be voluminous and complex. There may be layers of interrelated documents with additional provisions incorporated by reference. This creates a situation in which each party to a dispute can present a self-serving reading of the contract documents. The two cases in this issue are examples.
A public project owner issued a request for qualifications (RFQ) seeking potential bidders for a highway construction project. The RFQ said the owner would obtain necessary rights-of-way (ROW) prior to the issuance of the request for proposals (RFP). But the RFP and the contract documents required the contractor to provide services in support of the owner’s acquisition of the ROWs. Which party assumed the risk of delay in ROW acquisition?
In the second case, a private negotiated contract provided a geotechnical report “for information purposes only.” The contract disclaimed responsibility for the accuracy of the information and expressly excluded the report from the contract documents. However, a contract drawing included a note mandating “strict” adherence to the recommendations in the report. Was the contractor obligated to conform to the recommendations?
A representation in a government request for qualifications was not binding on the government. The subsequent request for proposals and contract documents superseded and expressly assigned responsibility for the matter in question.
A conflict was created when a contract expressly excluded a geotechnical report from the contract documents, but a contract drawing included a note referencing the report and mandated strict conformance with the recommendations in the report. Factual evidence would be required to determine the intended meaning of the contract.
Volume: 21, Issue: 3 - 02/15/2023
The Miller Act protects the payment rights of those who furnish labor or materials to federal construction projects. But what is “labor?” Does it include the on-site supervisory services of individuals who do not perform physical work? The statute is not much help in this regard as it does not define the term.
The lack of guidance on this issue at the federal appellate level is surprising, but the U.S. Court of Appeals for the District of Columbia Circuit recently joined the Eighth Circuit in addressing the matter. The court applied an expansive reading, consistent with the remedial purpose of the Miller Act.
The second case in this issue involves the enforceability of a “Liquidated Damages/Economic Disincentive” clause under Texas law. A federal appeals court had to decide if the economic disincentive provision was permissible. And if not, was the clause enforceable as liquidated damages?
The third case addresses a contractor’s responsibility for replacing work that was damaged by weather prior to completion and acceptance by the federal government. The Permits and Responsibilities clause would seem to govern the issue. The contractor, however, made multiple arguments why it should not.
The U.S. Court of Appeals for the District of Columbia Circuit joined the Eighth Circuit in ruling that the work of on-site supervisory personnel qualified as “labor” furnished to the project within the meaning of the Miller Act.
A private construction contract was not subject to a statute authorizing the use of “economic disincentive” clauses. A contract clause therefore had to be evaluated as a liquidated damages clause. It was an unenforceable penalty under Texas law.