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Volume: 17, Issue: 19 - 10/15/2019

 

When a contractor claim reaches the litigious stage, project owners frequently argue that the claim has been settled, waived, and/or released. But the owner’s history of dealing with the claim may undercut that argument. The ruling on this focused on modification release language, as well as ongoing negotiations.  

 

Two other cases in this issue deal with a subcontractor's actions invalidating a lien filing and the veracity of claimed costs on a cost-plus contract. Read more


 

The government’s continued negotiation of a claim with a contractor, internal consideration of the claim, and preparation of a draft contract modification compensating the contractor were inconsistent with the government’s subsequent position that the claim had already been settled and released.


 

A subcontractor’s mechanic’s lien filing was premature because the sub returned to the jobsite to repair items that were within the sub’s scope of work. The subcontractor had not “ceased” work within the meaning of the lien statute. The sub could have re-filed after performing the repairs but did not do so.


 

On a cost-plus contract, contract costs could not include subcontracted work outside the scope of the prime contractor’s agreement; nor could the contract costs include the unproved cost of the use of contractor-owned equipment.


Volume: 17, Issue: 18 - 09/30/2019

 

Control over the activities of another party generally creates a corresponding duty to use due care in the exercise of that authority. This includes the duty to avoid unnecessary economic harm. Contractual disclaimers may not effectively negate this responsibility. 

 

A project architect had authority to advise the owner regarding the rejection of nonconforming work, withholding of contractor payment, and termination of the construction contract for default. A Florida court ruled that this was sufficient supervisory control over the contractor to allow the contractor to sue the architect for professional negligence after a default termination. Read more.


 

A project architect had substantial supervisory control over the work of a contractor. This created a duty of due care running to the contractor. The architect did not have authority to terminate the construction contract for default but had authority to advise the project owner on that matter, and therefore had to exercise due care in making the recommendation. The contractor’s suit against the architect was for professional negligence, so it did not matter that the contractor was not a third-party beneficiary of the owner-architect contract.


 

A state mechanic’s lien statute covered the contract price less payments received under the contract. The profit on salvaged steel was not part of the contract price on a site restoration project. Lost profit was consequential damage. When the project owner breached the contract, the contractor could lien the property only for the contract balance due, not consequential damages.


Volume: 17, Issue: 17 - 09/16/2019

 

The federal courts, over the past four decades, have developed clear parameters for contractor recovery of unabsorbed home office overhead incurred as a result of owner-caused delay. An equation known as the “Eichleay formula” is used to measure these damages, and the courts have articulated prerequisites for the use of the formula.

 

Many state appellate courts, rather than “reinvent the wheel,” have adopted the federal rule. Ohio is among those states. On a recent Ohio case, an appeals court upheld denial of claimed unabsorbed overhead costs since all the requirements of Eichleay were not met. Read more.


 

A project owner’s nine-month extension of the contract period did not force the contractor into a “standby” position that prevented the contractor from taking on replacement work. Consequently, the contractor was not entitled to recover unabsorbed home office overhead in accordance with the Eichleay formula.


 

A California appeals court has ruled that a project owner could not circumvent a statute of limitations for professional negligence by characterizing its claim against an architect as a breach of contract.


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