Tag Archives: construction

Contracts are the Key to a Great Project (Guest Post)

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 Today I have the pleasure of another guest post.  Christopher G. Hill is lawyer and owner of the Richmond, VA firm, The Law Office of Christopher G. Hill, PC, a LEED AP.  Chris has been nominated and elected by his peers to Virginia’s Legal Elite in the Construction Law category on multiple occasions. He specializes in mechanic’s liens, contract review and consulting, occupational safety issues (VOSH and OSHA), and risk management for construction professionals.  Chris authors the Construction Law Musings blog where he discusses legal and policy issues relevant to construction professionals. 

Chris Hill

Chris Hill

First of all, thanks to Melissa for the great opportunity to post here at her blog.  She has been kind enough to post on two occasions (here and here) regarding the need for specificity and proper drafting in construction contracts.

Aside from the “back end” implications of a poorly drafted construction contract, there are other benefits to a well drafted set of construction documents.  The overarching reason for a well drafted contract is the setting of expectations.  Because the “contract is king” in most states, these initial expectations are key.

Without further ado, here are my thoughts on the proper setting of expectations.

1.            Make sure that the scope of work is well outlined.  Mere reference to “plans and specifications” is not enough.  You need to have at least a date for each of these or else a specific list of items to be performed and the specific scope of those items.

2.            Be sure that your dispute resolution procedures are well outlined.  This needs to be very specific and set forth any claims process.  While I am not a huge fan of mandatory arbitration, this is one area where you can tailor the dispute resolution to your needs.

3.            Make sure that the change order process is well defined and followed.  I cannot count the number of disputes that I have been involved in that come down to this process.

4.            While it sounds simple, define what “finished” means.  Does it mean acceptance by the architect? The Owner? The General Contractor?  What does “acceptance” mean?  All of these seem easy to think of answers to until the project is “finished” in your mind and not finished in the owner/general contractors mind.

5.            Attorney Fees, Attorney Fees, Attorney Fees! Without this provision (or a statute that allows for the recovery of these fees) most states’ courts will not allow you to recover the fees expended in resolving a contract dispute.

6.            Most importantly, read the contract and all of those pesky documents that are referred to by that contract.  Without a thorough understanding of the provisions of these other documents, you cannot know your expectations entering into a construction project.

In a world where one word in a contract makes all the difference, setting these expectations early can not only help you out with a dispute but can go a long way toward avoiding the disputes and (heaven forbid) do so without the intervention of your local construction lawyer.

Chris and I welcome your thoughts and comments.  Be sure to stop by Chris’  blog and say “hi” too!

Contract Essentials: 8 key points to consider

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eight ball

As promised, my guest post on Contract Essentials is now live over on Construction Law Musings.   Go on over and check out my post on the 8 key points you should consider in your construction contract. 

While not an exhaustive list, the 8 issues I discuss will put you on the right path to avoid litigation later over a construction project “gone wrong.”

Be sure to check out Chris’ other great construction law articles while you are there, and leave a comment to say “hi”.  See ya there!

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Photo:  behind the eight ball via Ed Schipul/Creative Commons license.

The Architect Has No Clothes! (or, why subconsultant contracts matter)

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Caesar statute

Everyone is probably familiar with the story the Emperor’s New Clothes.  There, the Emperor is not wearing anything but his birthday suit, and yet everyone is afraid to tell him so.  Today’s lesson is how to avoid being the clothesless fool by making sure you are covered with appropriate contracts with your subconsultants.

Previously we have talked about the need for a written contract on your construction projects.  Usually, the focus is on the contract agreement with the Project Owner.  Just as important, however, is the contract with your subconsultant.

A recent case brought to the attention of the E&O carrier Victor O. Schinnerer demonstrates what can happen when you have a signed contract with the Project Owner, but your subconsultant contract is not yet formalized.

The architect’s subconsultant agreement had been revised by the subconsultant to include the following language: 

Subconsultant’s maximum aggregate liability under this Agreement shall not exceed $250,000.

Having been warned of the dangers of limiting the liability of a subconsultant without having a corresponding limitation in the prime agreement, the architect attempted to further negotiate with the subconsultant. The subconsultant agreed to increase their liability to $500,000 but said “I am told by our legal counsel that based on the work we are doing and the amount of our fee, $500,000 is our limit.  

Work on the project had already started, but the subconsultant was withholding their design documents until they received a signed contract.  At that point, the architect turned to his E&O carrier for advice.

His options were limited at that point, and the architect was left with weighing the risk of a claim in excess of $500,000 versus the risk of a delay claim from the Project Owner if he took time to seek out a new subconsultant.  Essentially, the architect had no clothes.

Keep this lesson in mind the next time you are negotiating with subconsultants about a planned project.  You should ensure that their contract has the same obligations that you have in your contract with the Owner.

Have you experienced a situation where you were contracted to perform, but your subconsultant refused to sign a contract with similar terms? How did you handle it?Drop me a line in the comment section.

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Photo: (c) Mary Harrsch via Flickr/Creative Commons License.

Surety Bonds & Baseball (Guest Post)

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ballpark construction surety issuesIn lieu of a Tuesday Tip, today we have another Guest Post, this time by JW Surety Bonds, an A+ BBB-rated surety agency outside Philadelphia that sells surety bonds nationwide.

Take Me Out to the Surety Bond Game

Nothing says summer like heading to the ballpark for nine innings of cheering, athleticism and hotdogs. While the excitement of professional sporting events may not immediately bring to mind the less-thrilling (yet highly important) world of surety bonds, the two are intricately tied together.

Most obviously, multi-million contract bonds start the process of any new stadium building project. As stadiums get more and more complex, each trying to outdo the previous contender, the financial strain put on contractors becomes more acute. Thorough research is needed by surety companies to weed out wanna-be firms from those with the actual resources and know-how to erect a high definition, 4-D, interactive scoreboard the size of the Chrysler Building. Team owners need to know their pampered players will have a locker room to call home by the time opening day rolls around, or risk the ire of sports-deprived fans.

Beyond the general infrastructure, bonds are also required to secure everyone’s favorite part of a sporting event: the beer vendors. Corporate catering services or individual vendors hired to work in a stadium may be required to obtain liquor tax bonds as a promise to the government that they will truthfully report and pay all applicable taxes on alcohol sales.

Stadium owners can also require that food vendors of all kinds secure a performance bond to cover the length of the season. While the details of such a performance bond vary widely, they essentially serve to guarantee that the vendor will provide enough soft pretzels, hot dog buns and roasted peanuts to last through playoffs. Should a vendor default on their bond, the stadium owners could file a claim to receive funds to hire someone else to feed the masses for the remainder of the season.

About the only thing in a stadium that can’t be bonded is the players, but not for lack of trying. In 1983, the coach of a US Olympic volleyball team admitted to requiring his star player to post a performance bond. The player had previously quit, and the coach demanded a cash deposit to guarantee the player would stick around through the 1984 Olympics if he was allowed back on the team. While creating a contractual and financial obligation for a pitcher to complete a no-hitter or a pinch hitter to steal a given number of bases would be appealing to team managers, it’s neither practical nor beneficial.

With the average cost of a new stadium at just below half a billion dollars, and annual sports revenue well into the millions, it makes good business sense for owners to carefully vet and bond all parties involved, ensuring a homerun success.

Questions or comments about surety bonds, and your experiences dealing with bonding companies?  Share in the comment section below. 

If you haven’t already, be sure to also sign up for email or RSS delivery  direct to your inbox or reader so you never miss a Construction Law NC blog  post!

 Photo by  vivoandando via Flickr/Creative Commons license.

ENR’s Top 500, the Economy, and Lawsuit Fever

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Engineering News-Record logo

[This article was originally published on May 5, 2011]

Engineering News-Record (ENR) has released its annual list of the largest 500 design firms in the United States.  The list is based on design revenue generated by the firms, and covers both public and privately-held companies.

The bad news?  According to ENR, overall design revenue of the top 500 firms ($79.8 billion in 2010) was down 0.2% from 2009.  I know my clients have been hit hard.

One thing that construction lawyers see in down markets is more lawsuits.  Whereas in good times people will let something go to move on to their next project, in slow times contractors and owners sometimes look for a scape-goat.  That scape-goat, more often than not, is an insurance-carrying design firm.  Sad, but true.  Now, more than ever, make sure that you are practicing good risk avoidance, documenting everything, and communicating thoroughly.

There is some good news:  “There is a general feeling among the Top 500 firms that the markets will recover over the next 12 months.”  Let’s hope they are right.

What do you think?  Will the market improve this year?  How is your company weathering the economic storm?