Tag Archives: business dispute

Planning Ahead for Additional Compensation

Posted on by

money for additional services for construction administration

Does your designer contract have provisions in it for additional compensation in the event the construction project takes longer than the parties anticipate?  If you use the AIA 201 (2007) general conditions for the Contractor, it may.  The AIA provisions include:

 

§ 1.1.2 THE CONTRACT

The Contract Documents form the Contract for Construction. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. The Contract may be amended or modified only by a Modification. The Contract Documents shall not be construed to create a contractual relationship of any kind (1) between the Contractor and the Architect or the Architect’s consultants, (2) between the Owner and a Subcontractor or a Sub-subcontractor, (3) between the Owner and the Architect or the Architect’s consultants or (4) between any persons or entities other than the Owner and the Contractor. The Architect shall, however, be entitled to performance and enforcement of obligations under the Contract intended to facilitate performance of the Architect’s duties.

The language that I bolded is very important language.  It may provide a mechanism to recoup additional service fees for extended construction administration services.  Note, however, that I said “may.”

If your fees are based on a set number of construction days, what happens if the project gets extended?  Do you simply go without pay for extra months of CA services?  Do you re-negotiate with the Owner at that time?   You should consider this issue in advance to avoid disputes later on.

Best practice?  A clause in the Owner-Designer contract that states that additional services compensation will kick in after a certain date,  at a set value per month.

If you wait until the issue comes up during the final phase of construction, you have much less bargaining power.  You also run the risk of the Owner claiming errors and omissions against you when you present a bill for extra services.  Deal with the issue up front, in much the same way that unit prices for rock overages are provided for upfront in the contractor’s contract.

Do you have experience with getting additional compensation after construction delays?  What worked best for your company?  Share below. 

And, sign up for email delivery of blog posts to your mailbox!

 Photo (c) Freefoto.com via Creative Commons license.

Spend Less Time with Your Lawyer with these Tips (Tue Tip)

Posted on by

“The best time to plant a tree was 20 years ago.  The next best time is now.”  ~Chinese Proverb

————————————

If you haven’t yet acted to streamline your contracts and your new client procedures, do so now.  Unless, that is, you like spending time with your lawyer.  Lawsuits take time and money.  Avoid them (and your lawyer) through good risk avoidance practices.

Last year I wrote a post on 6 Ways to Limit Risk through effective use of contracts on your Projects.   Included in that list were such tips as:

  • Always, always, always use a contract for each new project.  (Verbal agreements are very hard to prove in Court).   Without a written contract, you are trusting yourself to laws you may not agree with or giving up valuable protections.
  • Get your contract reviewed by your insurance carrier.  Insurance check-ups through your agent or broker are usually free.  Why risk it?
  • Have your contract reviewed by your attorney.  ( I happen to know someone who does this regularly for her clients.)
  • Establish a new client protocol.  Make sure all new clients sign proposal or engagement letters.  Document now; worry less later.

These are all extremely important ways to minimize your risk.  Of course, if you are reading this blog, I recognize that I am probably preaching to the choir.  But it is worth repeating.  Just do it.

Do you have procedures that minimize your company’s risk?  Tell me in the comment section, below, what has worked for you.

If you need help creating or revising your contracts or client protocols, drop me an email at mbrumback@rl-law.com.  

Photo: (c) Freephoto.com via Creative Commons License.

Engineering flaws cited in Oil Spill Report

Posted on by

Horizon explosion

The Chief Counsel’s Report on the BP Deepwater Horizon Oil Spill and Offshore Drilling has been released.  Following on the heals of the January National  Commission report to the President, the Chief Counsel’s report “provides damning evidence that preventable engineering and management mistakes—rather than mechanical failings—were the primary cause of the Deepwater Horizon rig explosion last spring,” notes ENR’s Pam Hunter.

Among the Technical Findings, the Report states that the root cause of the failure was that the cement that BP and Halliburton pumped to the bottom of the well did not seal off hydrocarbons in the formation.  The report acknowledges several factors which may have increased the risk of cement failure, including:

  • drilling complications forced engineers to plan a finesse  cement job that called for, among other things, a low overall volume of cement.
  • the cement slurry itself was poorly designed—some of Halliburton‘s own internal tests showed that the design was unstable, and subsequent testing by the Chief Counsel‘s team raised further concerns.
  • BP‘s temporary abandonment procedures—finalized only at the last minute—called for rig personnel to severely underbalance the well before installing any additional barriers to back up the cement job.

Among the Management Findings, the Report states:

  • BP did not adequately identify or address risks created by last-minute changes to well design and procedures. BP changed its plans repeatedly and up to the very last minute, sometimes causing confusion and frustration among BP employees and rig personnel.
  • Halliburton appears to have done little to supervise the work of its key cementing personnel and does not appear to have meaningfully reviewed data that should have prompted it to redesign the Macondo cement slurry.
  • Transocean did not adequately train its employees in emergency procedures and kick detection, and did not inform them of crucial lessons learned from a similar and recent near-miss drilling incident.

Legal Status?  The lawsuits that will be flowing (pardon the pun) from this disaster will be extreme.  Expect to see possible class action certifications requested for some of those that were suffered damages.  In any lawsuit related to the spill, the report by the Chief Counsel will, undoubtedly, be Exhibit A.

——————————–

Photo credit:  Richard Sullivan, via Wikimedia/Creative Commons license.

Can a designer limit his liability to his fees for service?

Posted on by

Architects and engineers (and the owners/contractors with whom they contract) often wonder whether limiting liability language is enforceable.  The answer, as in much of construction law, is very much dependent on what state’s court will be interpreting the contract.  Some states allow such limiting language, and others do not.

sign: proceed at own risk

 

In North Carolina, so long as the limitation of liability is not also an agreement to be liable for the other party’s negligence (which is barred as against public policy), such a limitation of liability is enforceable.  A case discussing this issue from the engineering perspective is Blaylock Grading Co., LLP v. Smith et al, 189 N.C. App. 508, 658 S.E.2d 680 (2008).  In that case, a surveying engineer limited his liability, via contract, to $50,000.  The Court, citing an earlier state Supreme Court decision, ruled that the limitation was valid and enforceable:

People should be entitled to contract on their own terms without the indulgence of paternalism by courts in the alleviation of one side or another from the effects of a bad bargain.  Also, they should be permitted to enter into contracts that actually may be unreasonable or which may lead to hardship on one side.  It is only where it turns out that one side or the other is to be penalized by the enforcement of the terms of a contract so unconscionable that no decent, fairminded person would view the ensuing result without being possessed of a profound sense of injustice, that equity will deny the use of its good offices in the enforcement of such unconscionability.  Id. at 511, 658 S.E.2d at 682.

Is this rule absolute?  Clearly not, as the above quote indicates.  Unconscionable limitations will not be enforced.  Moreover, a third party, not subject to the contractual terms, is free to sue in negligence.  But as between the contracting parties, such a limitation on damages can be a powerful tool to minimize exposure to risk.

Questions about limitations on liability?  Comment below or drop me a line.  And be sure to sign up for email delivery of blog posts directly to your inbox.

 ————————

Photo:  “Proceed at own risk” by Dave Nicoll via Flickr/Creative Commons license 

Root canals & Lawsuits: two things to avoid (Law Note)

Posted on by

man flossing

No one (with the exception of sadistic dentists)  likes root canals, and no one (except lawyers) likes lawsuits.  In the same way you can prevent (or limit) the need for root canals through proper flossing habits, you can limit the number of lawsuits you need to be involved in if you include everyone you should the first time around.  For those involved in filing construction liens, this means that when you perfect a lien by filing the lawsuit, be sure you include everyone you need to include.  A recent North Carolina Court of Appeals case demonstrates this principle in full living color.

In Lawyers Title Insurance Corp. v. Zogreo, LLC, __ N.C. App. __ (November 16, 2010), two contractors filed and perfected valid liens on a piece of property.  They did not include, in the lawsuits to perfect the liens, the banks which had given funds to the property owner after they first began work on the property.  The Court held that it was entirely proper not to include the banks (who held deeds of trust on the property to secure their loans); however, by the contractors’ failure to include them, they were forced to later litigate priority issues with the banks.  This is because “if a subsequent encumbrancer is not joined [in the underlying lien perfection lawsuit], he is not bound by the judgment in the action between the contractor and the owner.”

In other words, even though they filed proper liens, filed the lawsuits timely, and even won final judgment in those lawsuits, because they did not include the banks, the banks were free to start a new action, which they did in this case.  The banks also obtained an injunction to stop any judicial sale of the property until priorities could be established.

Moral of the story? It is better to include all subsequent encumbrancers (i.e., the banks) when perfecting a lien.  It’s not required, but it is better practice.  (And flossing your teeth isn’t required, either).   After all, who wants a root canal, or, in this case, to re-litigate your right to be paid money in yet another expensive lawsuit?  When it comes to root canals and lawsuits, fewer is better.

Sign up for email delivery of all blog posts directly to your email through the subscription box on the front page of the website.

——————-

Photo: Day One Hundred Fifty-One by Eric Mesa via Flickr/Creative Commons License