Individuals enter into business associations for a variety of good reasons. One is the limitation of personal liability. Corporations, limited liability companies, and limited partnerships all offer this advantage. But when conducting business, individuals must be careful. When signing any document, the individual should include their title and name of the business entity they represent.

The managing member of an LLC accepted an electronically transmitted proposal from a contractor. The individual apparently did not notice that the signature block read “Individually and Managing Member.” The individual was personally sued for payment under the contract.

The other case in this issue involves filed sub-bids on public works projects. While these trade contracts are tied to sections of the contract specifications, they may incorporate by reference other work that is outside of the trade. A drawing listed in the mechanical specifications depicted elements of site improvement work.

The managing member of a limited liability company signed a signature block that referred to the member “individually.” The body of the agreement, however, consistently referred to the LLC as the contracting party. The agreement was ambiguous regarding the member’s personal liability on the contract.

A contract drawing had not been admitted into the judicial record. Consequently, an appellate court could not determine whether out-of-trade site improvements had been incorporated into the masonry subcontract.

When a project owner issues a deductive change order reducing the scope of the project work, the owner is entitled to a credit against the fixed contract price. The deduction should reflect the cost of performing the deleted work. What if the deductive change order results from the owner’s own error in its specifications? And, what if the contractor tries to read the defective spec out of the contract, arguing it had no impact on the bid price?

The Federal Circuit of the U.S. Court of Appeals recently addressed this situation. While the parties had argued vigorously over whether the error was latent or patent—affecting the contractor’s duty to seek pre-bid clarification—the contractor’s own documentation indicated it was aware of the error prior to bid submittal. The government was entitled to the deductive credit.

The second case in this issue involves the calculation of an architect’s design fee that was based on a percentage of total construction cost. When the construction has not been completed, can the total cost be extrapolated from the actual cost of partially completed work? If estimated costs are based on bid prices, must the architect’s fee be derived from the low bid?

The third case applied a no-damages-for-delay clause to the statutory definition of money “due and owed” under a public works construction contract. The trial court had jurisdiction to consider the contractor’s claim for delay damages.

Contract documents called for improvements to a non-existing chilled water system. The contractor acknowledged it was aware of the error when it bid the contract but had taken it into consideration when pricing the work. Nonetheless, the government could take a credit when it deleted the improvements from the contract requirements.

A Massachusetts appeals court has addressed an architect’s fee stated as a percentage of the cost of the construction. When construction was not completed, the actual cost of the work performed was not relevant. Bid prices could be used to determine estimated cost, but the lowest bid was not necessarily determinative.

A no-damages-for-delay clause raised questions as to whether delay damages were “due and owed” under the construction contract. However, this did not deprive a trial court of jurisdiction under a state Contract Claims Act.

Most states have statutory schemes to protect the payment rights of contractors and subcontractors on public works projects. Unable to file mechanic’s liens, they are allowed to assert claims against undisbursed project funds held by the public project owner. They are required to submit the amount owed via a certified or verified statement.

This gives rise to a question: must the amount due consist entirely of unpaid invoices for labor and materials furnished to the project? Or, may it include delay damage claims that are disputed and not quantified under the terms of the contract?

The Colorado Supreme Court recently addressed this question. The court ruled that a verified statement of claim could include delay damages to the extent the damages comprised increased labor, materials and equipment costs caused by delay. However, the statement of claim could not include “purely consequential” damages of delay such as lost profit or idle time. Those damages did not represent value added to the public project.

The second case in this issue involves stipulated cost allowances in a cost-plus contract with a guaranteed maximum price. Although an arbitrator appeared confused regarding the application of the allowances to the maximum price, this did not amount to arbitrator misconduct. A California court was bound to let the arbitration award stand.

A contractor may include construction-related delay damages in a statement of claim under the state Public Works Act.

Although an arbitrator may have misunderstood the allowance provisions of a cost-plus contract and the impact on the guaranteed maximum price, a court will not review factual or legal errors of that arbitrator. Such errors do not constitute wrongdoing.