ConsensusDocs: Training on the new forms (Tue Tip)

ConsensusDOCS logo

As previously discussed on this blog, one of the form contract sets available for construction projects is that of ConsensusDocs.  ConsensusDocs was created in 2007, based on the (now discontinued) Associated General Contractors of America forms.

The newest ConsensusDocs forms have been released–three years early.   As explained by Chris Hill on his Construction Law Musings  blog, the early release is due to the many changes in the construction industry since the release of the first documents in 2007.

Now there is a free webinar that will discuss the changes to the revised ConsensusDocs forms, including topics such as:

The webinar will take place:

Thursday, March 31st from 3:00 PM- 4:30 PM ET

Questions about ConsensusDOCS or other form contract documents?  Drop me a line in the comment section, below.

 

Lien Law Changes: Bad for Designers?

UPDATE:  Designers may file Notices of Commencement when they start their work, which should eliminate or significantly reduce the priority date concerns expressed below.  See this post for more details.  — mdb  3/4/11

gavel, law books, & hard hat

The work of the NC Bar Association’s Construction Section Lien Law committee continues, and it may drastically change the lien law landscape for architects and engineers.

On February 18, the Construction Law Section Council, the governing body of the Section, voted 11-4 to accept the latest draft version which must still be approved by the NC Bar Board of Governors.  After approval by the Board, it will then need sponsorship at the General Assembly.   The lien law changes have divided the construction industry – some believe the changes are beneficial, while others worry about new requirements contained within the bill.

Of particular note for architects and engineers, the new lien law envisions a new Notice of Commencement which would then act as the first date of service for everybody who works on the project.  The new law would give almost everyone on a project the same priority date.  Almost all liens would then relate to and take effect as of the Notice of Commencement date.

In other words, designers and others who perform work very early in the project would have no stronger lien rights than those who perform work at the very end of the project.  If there are insufficient funds to satisfy all of the liens, the net result is that architects and engineers will have to share pro rata will all contractors and subcontractors from the owner’s assets.   (And, to answer a question posed to me the other day, yes, architects and engineers have lien rights on projects in North Carolina!)

Is there a way around this for designers and other early performers? Yes and no.  One way a designer can protect his priority is by filing a Claim of Lien before the Owner files the Notice of Commencement.  (See section 44A-10 of the new draft bill).  However, as you can imagine, filing a Claim of Lien before construction has even started is likely to be frowned upon by the Owner.  Furthermore, the lien would have to be timely perfected, which involves actually suing the Owner.  Obviously, use of the Claim of Lien to beat the proposed Notice of Commencement date will have limited, if any, practical use for construction professionals who are working on a project and want to maintain a good relationship with the Owner.

There are many good things in the new bill: a way to streamline payment issues to ensure subcontractors are timely paid when the general contractor is paid, for example, as well as an attempt to provide lien rights to parties even after a bankruptcy filing, which had been made impossible by recent cases.   However, the priority issue is definitely bad for designers, as well as others who do their work very early in the project.

Comments, questions, or thoughts about the proposed changes?  Let me know in the comment section, below.  And sign up for regular email updates from this Blog, so you never miss a post.

Tues Tip: Check out the new AIA Bond forms

Have you seen the 2010 AIA 312 Payment Bond Form?  If you regularly deal with AIA bonds, be Payment Officer looking at demolitionsure to check out this blog post, entitled “What changes you need to know about in the new AIA A 312 Payment Bond” from the New York Construction Law Update Blog.

  Of particular note:

There is a new section (7.3) that expressly states the surety’s failure to respond within sixty (60) days does not constitute a waiver of any potential defenses.  However, the new AIA A312 also states that if the surety fails to respond and if the claimant has to bring an action to recover under the bond, and is successful, then the surety will be responsible for attorneys’ fees incurred by the claimant. 

The new Section 16.1 provides certain minimum requirements that must be in the notice of claim to constitute a valid claim under the bond.  Previous versions of the AIA A312 did not contain such minimum requirements and a claimant in a rush could potentially submit a simple letter identifying the project and setting forth the amount of its claim to try and squeeze in before the deadline to submit a claim. 

While it is tempting and easy to skip reading standard form contract documents, that is not a good practice.  The new requirements involved in making a bond claim, for example, are something that would be easy to overlook if you have previous experience making bond claims– and it could be a very expensive lesson.  Moral of the story, as always, is to read your contracts, preferably with your attorney and insurance carrier at hand.

Do you use the AIA 312 Payment Bond form?  Thoughts about the new Form versus the old Form? Bonding questions in general?  Drop me a line or comment below.

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Photo copyright of U.S. Air Force and made available via Creative Commons license. 

Lien Law Changes Ahead? Add your voice!

How a Bill Becomes a LawAre you familiar with North Carolina lien law provisions?  Ever think they should be changed and updated?  You are not alone.   The NC Bar Association (through the Lien Law Revision Committee of the Construction Section) is in the process of preparing substantive changes to a proposed new Lien Law statute.  The committee is aiming to have a prepared piece of legislation drafted for consideration in the upcoming legislative session of the General Assembly.

According to the Lien Law Committee, revisions to the statute are needed for several reasons, including:

  • handling the uncertainty created by recent Bankruptcy court decisions relating to liens
  • reexaming the “relation back” and “double payment” issues in current lien law
  • reexaming the long form lien waivers and current problems with those waivers

Last week, at the Design Professionals Lliason Committee (another Construction Section committee), I was given a copy of the lien law draft proposal for a revision to the lien law.  The Lien Law Committee wants their proposals to be discussed by the construction industry, so that all sides can be fully vested in the new lien process.

Review the proposal and let me know what you think.  The proposal contains some rather large changes to the lien statute.  Are these good, bad, or irrelevant to your business?  Email me or comment below with any thoughts, questions, suggestions, or concerns.  I will pass all comments along to the Lien Law committee.

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Photo “How a Bill Becomes a Law” by Peter Merholtz via Flickr/Creative Commons license.

Follow your Change Order Requirements

 check markIt is extremely important that you follow your written contract requirements.  No where is this more evident than in the change order process.

Most contracts have an explicit provision for the payment for additional work– and they generally require a written, signed change order (or change directive) before the work is performed.  Can you get by with verbal agreements for additional work? Sometimes yes, sometimes no.  Will it be much harder to get paid for additional services without a signed change order? You bet.  So why put yourself through that trouble?

Often times parties begin to “waive” formal requirements for written change orders, and construction projects are often on tight deadlines where stopping work to get a fully executed change order would bog down the schedule.  However, you run the risk of throwing yourself on the mercy of the Court when you don’t play by the contract rules.

A new case out of the Eastern District of Virginia demonstrates this fact very clearly.  In Artistic Stone v. Safeco, 2010 WL 2977894 (E.D.Va July 27, 2010), the Court held that the requirement that change orders be in writing was to be strictly construed and the subcontractor in that case could not recover for verbal change orders that violated the written change order requirement.  The Court held that where there is a method to ensure recovery of additional extra work in the written contract, the subcontractor could not recover additional money when it failed to follow that method.

“Written change order requirements maintain order and predictability in the construction business, and are meant ‘to avoid subsequent disagreement, and prevent just such a controversy as has arisen in this case.  For this reason, ‘where there is a method under the contract by which a party can insure the recovery of the cost of extra work, that party is not entitled to recovery where it fails to follow that method.'” Artistic Stone Crafters at 5.   [Internal citations omitted.]

A North Carolina court would likely concur.

To ensure you can fully recover for extra work, make sure it is authorized.  Follow the contract.  If circumstances make it so you cannot always follow the contract terms, document the situation as best as you can.  A follow-up email, confirming a verbal change order, would at least provide written evidence you can present in Court, should it come to that.  Otherwise, arguments can and will be made that the person who gave the change order wasn’t authorized to do so, and you may be stuck with no recovery for the extra work.

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Photo “white check mark on blue- acrylic on canvas” by kylemac via Flickr via Creative Commons license.

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