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.


 

Agency source selectors were free to make contract award without requesting clarification of a competitive proposal. Unlike sealed bidding, these requests are not mandatory in a negotiated procurement. Additionally, the source selector was not bound by the “acceptable” rating conferred on an offeror by a technical evaluation panel.


Volume: 18, Issue: 2 - 02/05/2020

 

Construction contracting is replete with deadlines for seeking compensation. Whether it’s making a demand against a project owner, perfecting a mechanic’s lien, or asserting a claim against a payment bond, there is almost certainly a time limitation. The deadline may be contractual or it may be statutory. Failure to comply will probably be fatal to the claim. Contractors must be vigilant in preserving their rights. Those who fail to do so will be left grasping at straws, such as one contractor found out four days late. 

 

The second case this month involves an inconsequential bid defect that was ruled as not justification for an agency's rejection of the bid. Read more.


 

A subcontractor’s payment bond claim period started to run upon the public project owner’s acceptance of the prime contractor’s work. Neither the owner’s performance of contract close-out procedures nor the prime contractor’s performance of corrective warranty work extended the 30-day claim period.


 

A public project owner should not have rejected a low bid as nonresponsive and announced contract award to a bidder $189,000 higher. The defect in the low bid was minor and immaterial. It did not provide the bidder with a competitive advantage. The owner was obligated to waive the deviation.


Volume: 18, Issue: 1 - 01/15/2020

 

When a design professional stamps, seals, or signs a document, a number of parties, not just the client, foreseeably rely on the information conveyed in that document. If the reliance is justified and the information is false, current legal precedent allows a third party to recover from the design professional for negligent misrepresentation.

 

A Massachusetts appellate court recently ruled that an engineer who stamped a set of drawings for a constructor did not mislead the project owner into believing the engineer would monitor construction for compliance with the building code. The express language of an “Engineer Disclaimer,” printed below the stamp, limited the scope of justifiable reliance.

 

Other cases this month include a constructive waiver of specifications on a government contract and a dispute between a subcontractor and general contractor about who was responsible for verifying existing dimensions. Read more.


 

An engineer stamped a set of drawings for a constructor but disclaimed responsibility for monitoring construction for compliance with the building code. The engineer did not negligently mislead the project owner into believing the engineer would be playing that role.


 

A subcontractor was responsible, under the terms of its agreement, for field verification of the dimensions of an existing structure. The sub could not rely on engineering drawings or as-built record drawings. Contractor approval of subcontractor shop drawings did not relieve the sub of that responsibility.


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