Statutes requiring a party to a dispute to pay their opponent’s attorney fees can produce bitter results. Fee awards comparable to the damage recovery are not unheard of. In a construction contract context, these “fee shifting” provisions are found in prompt payment statutes and mechanic’s lien statutes. In both cases, the purpose is to compensate the party that was wrongfully denied payment.

A Kansas court addressed a situation in which a prime contractor made late payment to a subcontractor. The contractor said the late payment was justified by the sub’s refusal to sign lien waivers. The sub argued the subcontract language did not mandate waivers as a precondition to payment.

A Minnesota court was asked to apply a fee shifting provision in a mechanic’s lien statute. The contractor prevailed on its lien foreclosure action, but the project owner recovered a larger amount on its negligence counterclaim against the contractor. The owner argued it would violate the policy of the lien statute to allow the contractor to recover attorney fees under those circumstances.

The third case in this issue involved a termination for the convenience of the government. Restrictive language in the contract did not necessarily apply because the contract, when terminated for convenience, had been converted into a cost reimbursement arrangement.

Once a prime contractor demanded lien waivers from its subcontractor—discretion granted to the contractor under the terms of subcontracts—execution of the waivers became a condition precedent to payment. The sub’s refusal to sign the lien waivers excused the contractor’s failure to make timely payments.

An owner’s liability for breach of contract, and the mechanic’s lien which secured the contractor’s recovery, were distinct from the owner’s successful claim against the contractor for negligent construction.

After a termination for the convenience of the government, the contractor could raise claims for the cost of out-of-scope work, even though the work had not been authorized in accordance with the terms of the contract.

When a contractor’s work is suspended by the project owner, two types of overhead continue despite the contractor’s inability to perform work: extended field overhead and continuing home office overhead. The latter is usually referred to as “unabsorbed” home office overhead, while field overhead consists of direct costs related to the performance of a specific contract. Home office overhead is one step removed and therefore viewed with skepticism. The Texas statutes make a distinction.

The Local Government Contract Claims Act waives government immunity to allow contractors to recover what they are owed under the contract. The statute authorizes recovery of a contractor’s increased cost to perform the work as a direct result of a public project owner’s suspension of the work. This has been interpreted to include extended field overhead expenses. However, the statute expressly disallows recovery of “unabsorbed home office overhead.”

The second case in this issue involves a contractual punch list procedure. The owner was deemed to have accepted work items not included on the punch list. However, contractor compliance with the procedure was a condition precedent to the owner’s waiver of a claim.

A Texas public project owner had governmental immunity from a claim for unabsorbed home office overhead, but the owner had no immunity from a claim for increases in the direct cost of performing the work resulting from owner-caused delay.

A contractor was required to comply with the contractual punch list procedure as a condition precedent to the owner’s deemed acceptance of the work and waiver of claim.

When parties have an enforceable agreement to submit disputes to binding arbitration, courts are reluctant to review the merits of an arbitration award. If every award were subject to such review, the purpose and advantages of arbitration would be defeated. An award will be vacated only if an arbitrator exceeded the stipulated authority, violated public policy, or acted irrationally. An award is irrational if it is supported by no evidence whatsoever. These situations occasionally arise.

A New York court recently ordered that a delay damages award be vacated. The arbitrator failed to consider the claimant’s own substantial contribution to late project completion and also calculated delay damages at $1,000 per day, a figure which appeared to have been pulled from thin air.

The second case involves a private project owner naming an incorrect legal entity as the plaintiff in a suit against a contractor and subcontractor. The owner could not correct the problem without putting the claim outside the three-year limitation period of a statute. A California court was asked to bail out the project owner.

The third case addresses a Massachusetts public project owner’s use of the filed sub-bidder method of procurement. An electrical contractor alleged the owner had modified the electrical specifications in a manner that added work not customarily performed by the electrical trade.

An arbitrator’s award of delay damages was irrational and subject to being vacated. The arbitrator failed to account for the claimant’s contribution to late project completion and arbitrarily assigned a daily rate of $1,000 to delay damages.

A project owner named the wrong legal entity as plaintiff in a suit against a contractor and subcontractor. The owner was allowed to substitute the actual property owner as plaintiff and avoid having the suit barred by a three-year statute of limitation.