Volume: 18, Issue: 14 - 07/31/2020
Price adjustment clauses are common in construction contracts. Unit-priced contracts are frequently adjustable based on the actual quantity of work performed. Even fixed-price contracts may allocate the risk of certain latent conditions or other contingencies. All these contracts usually include a separate clause pertaining to changed or extra work. This week's first case involves a drilling subcontractor's efforts to be paid extra hourly costs for a stuck drill.
The other case in this issue involved a project manager’s authority to sign a claim release form on behalf of a corporate contractor. The project manager was found to have both actual and apparent authority to do so. The corporation was bound by the release. Read more.
A price adjustment clause in a subcontract applied to excess drilling time necessitated by obstructions. It did not apply to efforts to extract equipment stuck in the borehole. Compensation for those efforts required an advance written change order from the prime contractor. The sub failed to request a change order and was not entitled to recover the cost of the extraction.
A project manager had both apparent authority and actual authority to act on behalf of a corporate contactor regarding contracting matters. The contractor was bound by a final release of claims signed by the project manager.
Volume: 18, Issue: 13 - 07/20/2020
If the owner of a private construction project wants a particular brand and model of equipment, the owner simply specifies that product. This is usually not possible on public works projects. Open competition laws require consideration of functionally “equal” products. This can lead to disputes; and in this particular case - a costly one for a contractor.
The other cases this month involve standby costs on a suspended project and an issue where a joint check arrangement did not shift responsibility for payment to an owner. Read more.
While a contract allowed the use of a product approved to be equal to the specified product, the contract squarely placed responsibility on the contractor for changed work necessitated by the substitution. This was not altered by the project engineer’s approval of shop drawings. The contractor’s shop drawings did not indicate the impact of the alternative equipment on the piping system.
In order for a contractor to recover unabsorbed fixed overhead under the Eichleay formula, it is not necessary for the government to expressly order a standby of forces. It is the actual impact on the contractor that is determinative. And, a small amount of replacement work does not preclude contractor recovery.
The date of delivery of materials to a job site by a lower tier supplier did not affect the prime contractor’s liability under the state Prompt Payment Act. A joint check arrangement implemented by the project owner did not shift ultimate responsibility for payment of subcontractors and suppliers from the prime contractor to the owner.
Volume: 18, Issue: 12 - 07/01/2020
Joint check arrangements are useful business tools. They assure the prime contractor of a steady flow of materials to the job site. They enable the subcontractor to establish a supplier account the sub may otherwise be unable to maintain. They protect the supplier against subcontractor misallocation of payments received from the prime. What they do not do is convert the prime contractor into a guarantor of subcontractor payment to the supplier. This is what the Virginia Supreme Court recently got wrong.
In the other case this week, a public owner did not have the right to terminate a contractor that corrected safety issues prior to expiration of a cure notice. Read more.
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A lower-tier supplier was allowed to recover payment from a prime contractor even though a joint check agreement expressly disclaimed any contractual or equitable payment obligation on the part of the prime. A 4-3 majority of the Virginia Supreme Court ruled that despite the prime’s payment in full to its fixed-price subcontractor for furnishing and installing the drywall, the prime still had to pay the supplier for drywall furnished to the sub’s account.
Under the terms of a termination clause, the contractor was entitled to a notice of any deficiencies and allowed 15 days to cure those shortcomings. A municipality’s default termination was wrongful because the contractor cured safety violations prior to expiration of the 15-day cure period.