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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.


 

A take-over surety on a federal construction project could recover against the performance bond of a defaulted subcontractor. The take-over surety was a successor to its defaulted prime contractor and had all the contractor’s rights. A ratification agreement between the take-over surety and the subcontractor did not materially alter the subcontract or discharge the sub’s performance surety.


Volume: 17, Issue: 8 - 04/30/2019

 

It is not unusual for a construction project owner to furnish equipment or other goods to the project. This is not just with “labor only” construction contracts, but also with traditional design-bid-construct contracts. It is sometimes in the owner’s financial self interest to provide goods it already owns or can procure more cost effectively. What happens, however, when the owner uses its goods to gain leverage over the contractor? In the case of federal construction contracts, the contractor has limited recourse.

 

The other case in this issue involves the bonding off of mechanic’s liens.  Read more.


 

The government’s standard clause effectively disclaimed breach of contract liability for failing to provide listed government-furnished property. The contractor’s sole remedy was an equitable price adjustment, but the contractor failed to protect its rights under the Changes clause.


 

A bond recorded pursuant to state lien law in substitution for a perfected mechanic’s lien dissolved that lien. Consequently, a court complaint filed against the bond did not need to be recorded in the registry of deeds. The bond action had no impact on title to the project real estate.


Volume: 17, Issue: 7 - 04/16/2019

 

It is self-evident that a contractor and a subcontractor to whom the contractor has assigned a portion of the work should be working from the same defined scope of work. What happens when a contractor negotiates a change order with the project owner, increasing the scope and the price of the work, and fails to disclose the change order to the subcontractor performing that work? A Tennessee court sorted out this situation as it addressed claims for fraud and breach of contract.

 

Other cases in this issue involve design professional responsibility during the construction process and interpretation of representations made in a contract.  Read more.


 

A contractor did not defraud a subcontractor when the contractor failed to disclose it had negotiated a change order with the project owner, increasing the scope of work and contract price, while insisting the sub perform the expanded scope of work at its originally quoted price. The subcontractor suffered no actual economic harm.


 

Neither the language in a construction contract nor the consulting engineer’s conduct during construction made the engineer responsible for job site safety. The engineer’s knowledge of dangerous conditions, without job site authority, would not create a duty to warn an employee of the contractor.


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