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Volume: 16, Issue: 15 - 08/15/2018

 

Notice of claim clauses are common in construction contracts. The contractor must give timely written notice of an alleged change or else the contractor waives the right to additional compensation. Some of these clauses simply address the project owner’s reasonable need to manage its project and control its budget. But some are designed as lethal traps to defeat contractor claims for changed work. Read more.


 

A changes clause in a public works contract distinguished between directed changes and constructive changes – requiring timely written notice from the contractor – based on the subjective belief and intention of the owner’s representative. The rep’s subjective contemporaneous belief was determinative, even if that belief contradicted the terms of the contract and was unreasonable.


 

After the government entered into a takeover agreement with a defaulted contractor’s performance surety, the contractor could not appeal government reprocurement expenditures even though the contractor might have been ultimately liable for indemnifying the surety for those expenditures. This is distinct from a situation in which there is no takeover agreement and the government seeks to recoup reprocurement costs directly from the contractor.


Volume: 16, Issue: 14 - 07/31/2018

 

Construction contract disputes are usually strictly business matters. What did the contract say? How did it allocate risk? How does it apply to the facts of this project? Sometimes, however, these disputes involve drama – claims of scheming, trickery and betrayal. This issue includes two cases of that nature. Read more.


 

A contractor could pursue a breach of contract claim after the project owner allegedly switched contract drawing CDs between bid preparation and contract award. Neither the technical nature of the information nor the possession of a license as a professional engineer prevented the contractor’s vice president from giving fact testimony regarding the differences in the drawings and the cost impact. The vice president did not need to be designated as an expert witness.


 

A corporate officer was liable for breach of a fiduciary duty when he participated in shifting subcontract work from the corporation to a company he owned. The prime contractor was also liable for its knowing participation in the scheme.


Volume: 16, Issue: 13 - 07/16/2018

 

“Pay-if-paid” clauses are enforceable in most jurisdictions. These subcontract clauses make the project owner’s payment to the prime contractor a “condition precedent” to the prime’s obligation to pay the subcontractor for its work. When properly drafted, the clauses effectively shift the risk of owner nonpayment from the prime to the sub.

 

Courts interpret pay-if-paid clauses narrowly in order to limit the harmful economic impact on subcontractors. This was illustrated in a recent Maryland case. Read more. 


 

A “pay-if-paid” clause in a subcontract was enforceable. By its express terms, however, the clause applied to the “Subcontract Sum.” This was not a blanket waiver of the subcontractor’s right to recover delay damages or other increased performance costs, notwithstanding the project owner’s refusal to pay the prime contractor for those costs.


 

A project owner’s nonpayment under a construction contract excused the contractor’s refusal to perform further and discharged a surety from its performance bond obligations. The obligees of the bonds, including public entities named as additional obligees, could not recover against the bonds.


Volume: 16, Issue: 12 - 07/02/2018

 

It was an unusual situation. The contractor finished the project well behind schedule. The federal project owner certified substantial completion but withheld more than $150,000 in liquidated damages from the final payment for late completion. The owner then negotiated contract modifications for extra work, which the contractor performed.


The contractor argued it was entitled to remission of the liquidated damages. By authorizing additional work, the project owner implicitly extended the project performance period and lost the right to assess liquidated damages. Read more. 


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