Volume: 18, Issue: 5 - 03/16/2020
Physical access to the job site is necessary for contractors to perform their work, yet access is seldom absolute or unfettered. Construction contracts frequently establish site access parameters. But occurrences in the field, including owner directives, can also affect access. Two cases in this issue involve site access issues.
The third case in this issue involved a bonus fee provision in an architectural services agreement. The provision was ambiguous as to whether issuance of building permits was a precondition to earning the fee. Read more.
Contract provisions addressed overall site access and the hours of work, but not the method of work or phasing of the work. A roofing contractor was not guaranteed simultaneous access to multiple roofs.
A contractor asserting a claim for home office overhead had a threshold obligation to establish the critical path of the schedule. There is no presumption that government interference with site access would affect work on the critical path. In any event, the contractor’s claim was barred by acceptance of final payment.
A bonus fee provision in an architectural services agreement was ambiguous. The provision could be interpreted to mean the bonus was earned after the neighbors’ release of restrictive covenants and the municipality’s approval of changed use. But it could also be read to require issuance of building permits. The developer had cancelled the project prior to applying for building permits.
Volume: 18, Issue: 4 - 02/28/2020
In recent decades there has been an unfortunate practice in which unscrupulous contractors descend on storm-damaged areas to offer homeowners a deal. If the homeowner assigns its rights under its homeowners’ insurance policy to the contractor, the contractor will negotiate with the insurance company and repair the damage to the property, all at no charge to the homeowner. The first case this issue ruled a contractor violated statutes enacted to prevent such practices.
The second case involved a contractor left holding the bag for $3 million in performance costs on a public contract that was later ruled invalid after a bid protest suit by the second low bidder. Read more.
The assignment of an insurance claim for storm damage, from homeowners to a repair contractor, violated state statute. The contractor was not a licensed public insurance adjuster. Although the contractor contended it owned the claim and was not representing the homeowners, the assignment enabled the same abusive practices that led to the statutory prohibition.
The winning bid on a public contract in California contained some discrepancies between subcontractor percentages and prices. The awarding agency believed the discrepancies were immaterial and executed the contract. Despite a bid protest filed by the second low bidder, the agency issued a notice to proceed. The contract was subsequently ruled invalid and the contractor was left holding the bag for more than $3 million in performance costs.
Volume: 18, Issue: 3 - 02/17/2020
Freedom to contract is a hallmark of our legal system. But while two parties are free, within limits, to establish the terms of their own relationship, they are not free to define the rights of third parties who have not signed the contract. For instance, in a construction context, a project owner and a prime contractor cannot abridge the statutory lien rights of a subcontractor. There are other examples.
This month's three cases start with a win for a condo association against a developer that disregarded the contractor's substantial completion date for the purpose of a construction defects suit. The second case involved our old friend Eichleay unabsorbed home office overhead, this time on a contract termination situation. The third case looks at the nuances of a bid protest on a negotiated contract vs. a sealed bid one. Read more.
The contractual definition of “substantial completion” did not determine when the 10-year period of a statute of repose started to run. Parties to a construction contract could not alter the statutory definition, whatever that might be. And, parties to a construction contract could certainly not impose their terms on claimants that were not parties to the contract.
A contractor’s burden of proof for recovery of unabsorbed home office overhead calculated according to the Eichleay formula is not lower in a termination settlement context than it is in a claim appeal context. The case from the Federal Circuit, cited by the contractor, did not involve an Eichleay recovery, as the government terminated the contract for convenience prior to any contract performance or contract billing.