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Volume: 17, Issue: 11 - 06/18/2019

 

Two of the cases in this issue involve disputes over the contractual scope of work. It is useful to restate a couple fundamental principles of contract interpretation:

  1. A contract must be read as a whole, with its various provisions harmonized to the greatest extent possible. A contract should not be read in a manner that ignores or effectively nullifies material provisions.
     
  2. The specific governs the general. A broad statement regarding rights or obligations may be modified by a more specific provision addressing a particular matter.

This issue reviews how these rules of contract interpretation have been applied on two recent construction projects. It is important and instructive that contractors putting together a bid and managing a project must pay close attention to what's written in the contract documents and shown on the contract drawings.  Read more.


 

A contractor could not reasonably rely on one drawing note to support its interpretation of the scope of work. The contract documents were replete with affirmative indications to the contrary.


 

A contract expressly referenced two federal environmental statutes that applied to the project. A contract representation regarding the project’s environmental compliance referenced only one of those statutes. It did not refer to the second statute. Compliance with the second statute was neither a differing site condition nor a constructive change in the contract.


 

A bid solicitation required formal notice of award and execution of a written contract in order to form a binding contract. Neither a statement by an employee of the procuring agency nor posting of the contract award on an agency database could satisfy those requirements, so the agency was entitled to reject all bids and re-bid the contract.


Volume: 17, Issue: 10 - 05/31/2019

 

Not all delay caused by a contractor or subcontractor leads to the recovery of compensable delay damages. A party is liable for delay only if the overall project completion is extended, thereby increasing the cost of construction. The “critical path” of a schedule is that ever-changing line of inter-related construction activities that will affect the number of days required for project completion. 

 

This leads to a question: Must a party claiming delay damages always present expert critical path method analysis in support of its claim? A federal court recently answered this question in the negative, while acknowledging that appellate courts have praised CPM analysis as the most accurate calculation of delay. Read more.


 

Precedent in the Sixth Circuit of the federal court system holds that although critical path method analysis is the most accurate way to address construction schedule delay, it is not always necessary to use expert CPM opinion to prove compensable delay to project completion.


 

When the government terminates a contract for its own convenience, contract language prohibiting incurring costs prior to issuance of notice to proceed is superseded by the termination for convenience clause. The terminated contractor may recover direct and indirect costs of preparing for contract performance, plus profit on those costs, despite the absence of a notice to proceed.


Volume: 17, Issue: 9 - 05/16/2019

 

Subcontractor relations pose some of the greater challenges in the construction industry. Many of the issues are common to the entire contractual chain, although some are unique to subcontracting. All three cases covered in this issue involve subcontractor relations, addressing the change order process, the effect of a settlement agreement, and obligations to a prime contractor’s take-over surety, respectively.  Read more.


 

A subcontractor recovered its attorney fees and costs from a prime contractor under a state fair contracting statute. The contractor administered the sub’s change order requests in bad faith. However, the subcontractor was denied prejudgment interest. The sub’s initial change order requests were not sufficiently itemized and documented to constitute liquidated, precise amounts.


 

A contractor and subcontractor settled their disputes with an agreement that unequivocally waived and released all obligations under the subcontract. The settlement agreement effectively nullified the subcontract, including the arbitration clause in the subcontract.


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