05/31/2022

Editor's Notes

A “claim sponsorship” agreement calls for a contractor to submit subcontractor claims to the project owner in accordance with the procedural requirements of the prime contract. The contract may or may not establish responsibility for attorney fees and other costs as well as division of any funds recovered from the owner. But there is one constant—the contractor has an implied duty to deal with the subcontractor in good faith and with fair dealing.

 

A prime contractor on a Nevada public works project submitted a subcontractor delay claim to the owner and then misrepresented to the sub the reason for the owner’s denial. Concurrently, unbeknownst to the subcontractor, the contractor negotiated settlement of its own delay claim, accepted payment and waived all rights to further recovery. The Nevada Supreme Court was called upon to determine whether this had been a breach of the implied covenant of good faith.

 

The other case in this issue involved a federal agency’s statement, in a bilateral contract modification, that it would seek additional funding to settle another outstanding claim on the project. Did that constitute a government admission that it was liable on the claim?

 

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