Category Archives: Contracts

Are we having fun yet? Construction in a post-COVID world (law note)

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Remember how I said to never assume?  Yeah, about that……   even when you plan for failures, mistakes, and other problems, sometimes things get so outside the realm of what you considered that it can leave your construction project spinning.  Take, as a random example, a world-wide pandemic that shuts down supply chains, shuts down job sites, and limits the labor pool.  Just as an example.

What does construction law say about pandemics?  They fall under an “Act of God” that you may have read about in your contracts, or in the contracts of the contractors working your projects.  An “Act of God” is an event that is not foreseeable, and as such not something the parties could have anticipated when they drafted the contract.  Acts of God generally excuse a party’s failure– for example, a contractor’s failure to complete the project on time can be excused when an “act of God” has occurred. 

By now, you’ve dealt with the practical fall out, one way or another.  Many projects no longer made financial sense for your clients.  Others may have been modified, reduced in scope, or had substitute materials put in place.

What do you, as an architect or engineer, do now, faced with the potential for further shut downs, supply chain issues, and other COVID variants?  The short answer is to give yourself options and assume changes will be needed to your own scope of work on each project.  Consider:

  1.  If the project needs to be re-designed to account for shortages, can that be an additional service that you get paid for?
  2. If the project requires substitute products, how many of those are part of your basic service, or is there a point at which you should get paid hourly for researching, reviewing, and approving substitutes?
  3. If the project takes a lot longer than anticipated to complete, whether due to government shut downs, labor issues, or supply chain problems– can you get paid increased contract administration fees?  And, is there a contract provision that allows you to increase your hourly rate after X number of months, to reflect inflation?

These are some of the ways that you, as a designer, can protect yourselves from ongoing delays, and make sure you are not tied to a project without a way to recoup your extra costs.

Thoughts?  Questions?   Share what’s worked for you or what you’d like to learn more about in the comment section below.

 

 

Never, ever, ever assume! (or, how a stuck shoe is like a construction project assumption)

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This summer, I had the fortune of taking a trip to Europe.   The first place I visited was Amsterdam.  A lovely town with a lot of culture and more canals than you can shake a stick at.  I was meeting family there, but had hours to kill ahead of time.  So, I decided to take the train from the airport into the City Centre, leave my bags at the train station luggage locker, and begin exploring.

My plan took its first misstep when I attempted to board the train.  Not being in a hurry, I let the other passengers get on first.  Sure, I noticed the train conductor blowing his whistle while I stepped onto the train, but figured I was fine since I was already on the steps up.  Until, that is, the door began to close, with me in the doorway, suitcase in the train, one foot inside, and one foot mid step up to the cabin.   The door closed on my backpack (which was still on my back), but I managed to force it into the train compartment.  My shoe, however, was not quite as lucky.  Part of my shoe made it inside, and part was outside the door.

 

shoe

The shoe in the doorway

No worry– just look for the door release mechanism, right?  Wrong!  There was none.  The train started up, with my shoe still halfway in and halfway out of the train.  (Luckily my foot itself made it inside all in one piece).  The conductor came along to scold me, and told me that he could *probably* rescue my shoe once we got to Central Station.  In the meantime, I sat on a nearby jump seat, keeping tabs on my shoe and  fuming that this was *not* the way I planned to start my vacation.  Long story short– the train conductor was able to salvage my shoe, but not without a lot of commentary on how I should never have boarded the train after the whistle blew.  Lesson learned.

HOW, you may ask, does my shoe tale relate to your construction project?  It’s in the title:  never, ever, ever (ever, ever, ever) make assumptions.  I made the unfortunate assumption that the train doors in Europe would release when met with any type of obstacle, since they tend to do that here.

You make that assumption when you do projects for clients without a formal letter or contract outlining your scope of work.  Sure, you’ve worked with a client before, and know what he wants.  But maybe times have changed, or management has a new policy in place.  Maybe in the past, you could simply email the client that you needed to increase your hourly rates.  Now, you are required to keep the same hourly rates for the entire project.   Unless, that is, you already planned for regular increases in your contract itself.

Or, maybe you are working with a new owner client.  That owner may assume that you will do certain things for your fixed rate, that are not standard and were never even on your radar.  Do you have exclusions to your Scope of Work in the contract?  If so, you are set.  Point the client there, and you should be done.  Or, you could be like me, and go shoeless into the City.  Your choice!

Have you ever made an unfortunate assumption?  If you did and lived to tell the tale, share in the comments below or drop me a line.  I want to know that I’m not the only want that has stuff like this happening to them!!!

Do Not Pass Go! Duty to Defend in a Professional Services Agreement (law note)

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sword to defendRecently a client asked me to review a contract for his Firm.  The Owner, who had prepared the draft, had inserted a rather stringent “duty to defend” clause.

As I told my client, a duty to defend clause is not a good idea for a couple of reasons.  First, if you agree to provide a defense, what that means is that you are footing the bill for the Owner if the Owner is sued by another party.  Think about that for a minute.  You are paying legal fees for someone else’s legal defense.  You may or may not be able to direct the litigation or have a say in who is hired.  Can you say open check book?

Secondly, and more importantly, the duty to defend is almost never insurable.  What that means is that your professional liability carrier will not be footing the bill—your Firm will be doing it.  This is not a case of adding the Owner as an additional insured, so do not confuse the two.  Agreeing to a duty to defend is an extremely burdensome, and potentially costly, mistake.

What do you do if your Owner is insisting on such a clause?  Try to get the clause written out of the contract, period.  Point out to your Owner that it is not covered by your professional errors  & omissions policy.  That alone is often enough to get Owners to agree.  You might also contact your insurance carrier/agent to add weight to your statement.  They can point to the provisions in the policy that will likely exclude coverage.

If the Owner will not strike the provision, then what?  Seriously think about whether this is a risk you can afford to take.   What type of project is it?   Do you know the contractor and other parties—are they reputable and qualified?  And most importantly, is the profit to your Firm such to justify the potential risk.  Usually, the answer to the last question is no.

Have you seen a “duty to defend” in an Owner contract?  Did you agree to it?  Share in the comments below, or drop me an email.

Photo: (c) MatthiasKabel via Creative Commons Attribution-Share Alike license.

How your disgruntled client can turn into your very own car crash! (and how to avoid it)

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Over the summer, I was involved in a car crash.  It was *not* my fault– heck, I wasn’t even driving but riding shotgun.  But it wasn’t my husband’s fault either.  A guy pulling out of a parking lot was watching the traffic coming up the road, but failed to see our car sitting in the same intersection waiting to turn into the same parking lot.  He ran right into us.  Here was the damage:

car damage

 

It may not look like much, but the panels were so damaged it cost almost $9k in damages, over a month of car rental fees, and a LOT of aggravation on our part.  The guy who hit us was very nice, apologized, and was concerned if we were injured.  His insurance company ultimately paid for all of the damage.  However– it wasn’t he who suddenly got a new part time job– that was me.  I had to spend lots of time with police, insurance representatives, auto body mechanics, rental car places, you name it.  If you’ve ever been in an accident, you know the headache involved.  In fact, I have had 2 other accidents over the years (again, neither of which were my fault– I think I’m just a beacon for bad drivers?).  One of those accidents was a 4 car accident– a driver hit my car, pushing it into the car ahead, which went into the car ahead of that.  In that accident, my car was actually totaled.  Fun times!

How is this relevant to your life as an architect or engineer?  If you stay in the game (that is, the design field) long enough, chances are, you will, at some point, end up dealing with disgruntled clients.  One of those clients may even file a lawsuit against you.  Or, for that matter, you may end up getting sued by another party involved in your construction projects– one that you don’t even have a contract with.

If that happens, you too will have a new part-time job– working on your defense.  Think meetings with your attorneys, calls with your insurance adjuster, unbilled time sitting for deposition, searches through all of your project emails and files, and the potential for a long jury trial (again, unbillable time for you).  Sounds fun, doesn’t it?  Maybe even makes you want to scream with the unfairness of it all.

The thing is, while there are certain things you can do to minimize your risks of being sued and your chances of prevailing if you are sued, even if you win, you’ve lost in time and opportunities.  In a fair system, you wouldn’t face this for unfair or frivolous claims.  In a fair system, I wouldn’t have to spend hours dealing with the fall out of an accident I didn’t cause.  But sometimes, stuff happens.

Just like there are ways of minimizing your risk of car accidents (turn signals, watching for inattentive drivers) and reducing damage when they occur (using seat belts, driving slower), there are also ways to minimize your risk of a lawsuit and reducing your damage when they do occur.

Some ideas:

  1. Have a written contract for every project, every time
  2. Get that contract reviewed by your insurance carrier and lawyer
  3. Be sure to specify what you will, and will not be doing in your scope of work  (being redundant is good here!)
  4. Establish clear payment terms, and expectations about fees for additional services, up front.
  5. Have good document management systems in place, which you’ll need for if/when litigation does occur
  6. Be aware of warning signs that there may be a lawsuit in your future; and
  7. If you do get sued, don’t panic, but take some steps to help your case get off on the right foot

But remember, when all is said and done:  you place your bets and roll the wheel.  Sometimes, your number comes up.  While these tips cannot prevent being sued by a disgruntled client, they can lessen the risk and impact.  And that is *almost* as good as getting your car fixed, returning the rental to the shop, and quitting your new part time job!

Have you had to suffer through an unfair lawsuit from a disgruntled client or third party?  Tips you wish you had known earlier?  Concerns about your own contracts?  Share in the comments below or drop me an email at [email protected].

Photo: Creative Commons License

Need to Cover Yourself for “Crisis” Changes on a Job Site? Try These Tips (guest post)

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Today, we welcome back friend of the blog Christopher G. Hill. 

Chris is a  LEED AP, a Virginia Supreme Court certified mediator, construction lawyer and owner of the Richmond, VA firm, The Law Office of Christopher G. Hill, PC.  Chris authors the Construction Law Musings blog where he discusses legal and policy issues relevant to construction professionals.  

His practice concentrates on mechanic’s liens, contract review and consulting, occupational safety issues (VOSH and OSHA), and risk management for construction professionals.  [His blog, by the way, was an active influence when I was just getting started on my own blogging endeavor.]  Take it away Chris………….

Chris Hill

 

I am always happy to guest post here at Melissa’s blog (despite the fact that she went to a school with the wrong color blue) and she had a great idea for a topic (namely that in the title of this post) so I decided to run with it.  So, without further ado. . .

As construction professionals we’ve all been there.  Something happens on a job site that requires immediate attention and possibly a changed sequence of work or possibly a change to a subcontractor’s scope.  It could be a buried power line that Miss Utility failed to mark properly or an owner that wants a different HVAC configuration at the last minute.  It could also simply be that it rained too much, and work had to slow down.

The above examples are instances of items that are beyond the control of the general contractor or the subcontractors and are the type that require shifts in work schedules and changes in scope that must be dealt with on the fly and require quick decisions and immediate action if the project is to meet any time of completion reasonably close to that which is listed in the contract documents.  It can often seem that there is no time to meet the written change order provisions of any well drafted construction contract.

Of course, failing to get your change orders in writing could lead to a situation that only a construction attorney could love: ambiguity, claims and possible litigation.  So, what do you do in the “heat of battle” when the Owner or General Contractor is pushing for the change and telling you to get it done, we’ll do the paperwork later?  While anything aside from an agreed change order with the signatures of all parties is not ideal, when the circumstances keep this from happening, the following steps can keep you from losing a potential claim:

  1. Use your smartphone.

    We all carry these computers in our pockets that also happen to have an app that works like a phone. — USE THEM.  When confronted with this type of situation, send an email (I personally hate texts because they’re hard to use later) with the understanding of the work to be done and either a price change or a statement that a price will be coming later in the day.  Be sure to end the email with something to the effect of “If this is not your understanding, please let me know” so that when you don’t get a reply before starting the new work, you are as covered as possible.

  2. Follow up on Number 1

    If you must use Number 1 above, be sure to fill out a claim/proposed change order the same day as the email with the proposed scope change and price.  Most construction contracts give you at most 3 days in which to file your claim or PCO if there is not one in place.  Immediate follow up will in most cases meet these deadlines.

  3. Review your contract and any Prime Contract.

    As stated above, there are deadlines in these documents.  Often there are additional and incorporated deadlines in the prime contract that may limit your follow up time even further.

  4. Don’t “punt.”

    Whatever you do, do not “punt” and fall into the trap of feeling as if you can settle up at the end of the job. Just because the relationship is friendly (or at least reasonably businesslike) at the time of the “crisis” does not mean that when the job gets to the end any paperwork omission won’t be used to avoid payment.

Of course, the ideal would be to avoid beginning the changed work until the change orders have been signed, but this is not always possible.

Great post Chris! 

Remember, without documenting project agreements, you may end up forfeiting your claims later on.  Create a good document system and use it.  During litigation, documents could make or break your case.  

Comments, thoughts, questions?  Drop a line in the comment section below.