Construction Law – Page 38 – Legal issues, news, and regulations concerning the construction industry

Appellate Court Accepts Measured Mile Method for Calculating Acceleration of Work Damages in Case of First Impression

Dec 06 2007

James Corp. v. N. Allegheny Sch. Dist., 2007 WL 4208589 (Pa. Commw. Ct. Nov. 30, 2007)

In this case, the Commonwealth Court of Pennsylvania held that the trial court properly measured acceleration damages sustained by a general contractor under the “measured mile” theory of recovery. In a multi-phased construction project entered into by the school district and James Corporation, the district delayed James’ performance by failing to obtain permits in a timely manner, by requiring extra work which interfered with the planned sequence of work, by relocating fencing and reconfiguring the erosion and sedimentation pond, and by requiring removal of asbestos (which was not in the contract). Amidst the delay, the district abandoned the contract schedule, refused to consider the time impact on the contractor’s planned sequence, and then terminated the contractor after substantial completion. The trial court awarded James damages for acceleration/compression of work, unpaid invoices, prevailing wages withheld, attorneys’ fees and expenses. Read More

General Contractor Liable to Subcontractor for Damages and Attorneys’ Fees for Failure to Fully Compensate Subcontractor for Work on Change Orders

Dec 04 2007

Am. Envtl. Contractors, Inc. v. Garber Constr. Co., Inc., 2007 WL 4358169 (Mass. Super. Ct. Nov. 26, 2007)

The Superior Court heard a jury-waived trial in which the plaintiff subcontractor sought damages from the defendant general contractor after an unexpected roof collapse created the need for substantial extra work on the project. The general contractor and the project manager executed several change orders for extra work after the collapse. The subcontractor claimed that it was not compensated for the full amount of extra work by the general contractor. The general contractor claimed it was owed the money by the project manager and filed a third-party complaint. Read More

Material Supplier Deemed to Have Contracted with “Subcontractor” to Permit Claim Against “Miller Act” Bond

Dec 03 2007

United States ex rel. E&H Steel Corp. v. C. Pyramid Enters., Inc., 509 F.3d 184 (3d Cir. 2007)

This litigation arose after a steel supplier on a U.S. government construction project asserted a claim against a payment bond issued by the general contractor (to which it had no contractual privity) pursuant to the Miller Act (40 U.S.C. § 3131). Because the Miller Act limits the availability of such bond claims to either entities in contractual privity with the bond issuer (the GC) or those entities having contractual privity with a "subcontractor,” the key issue was whether the entity with which the supplier contracted was a “subcontractor.” The District Court for the District of New Jersey, applying a number of a factors, determined that it was not a subcontractor and dismissed the bond claim.

Anti-Indemnity Statutes: A Threat to Limitation of Liability Clauses?

Dec 01 2007

By K&L Gates attorneys Richard F. Paciaroni and Janet M. Serafin

Limitation of liability clauses are frequently relied upon in design and/or construction contracts to manage risk by limiting the damages recoverable from contractors and design professionals. Historically, these clauses have generally been upheld, particularly when the contracting parties are both sophisticated entities. However, a growing concern over the trend of design professionals requiring contracting partners to indemnify them, despite the former’s own negligence, caused most states to adopt anti-indemnity statutes. What remains somewhat uncertain is how these anti-indemnity laws affect the enforceability of limitation of liability clauses. Two recent cases have invalidated a limitation of liability clause under the relevant anti-indemnity statute. While these cases still represent the minority view, they beg the question of the prudence of continued reliance on such clauses, particularly in jurisdictions which have not yet ruled on the issue.

Allocation of Risk in Today’s Non-Residential Construction Marketplace

Dec 01 2007

By K&L Gates attorneys John R. Dingess and Kari M. Horner

In December 2006, the Connecticut Department of Transportation (“ConnDOT”) was surprised by the lack of contractor response to its request for proposals for a $400-million plus, seven-year project to build a ten-lane bridge replacement for the Pearl Harbor Memorial Bridge on Interstate 95. Not a single contractor bid on the project.

Contractors were likely hesitant to build on the Pearl Harbor Memorial Bridge project because of uncertainties and difficulties in predicting labor and material costs for a seven-year project. One surety commented that the length of the project also contributed to the "risk profile" of the project. Another deterrent was the fact that the contract terms placed most of the risk on contractors, while also imposing high liquidated damages for failing to meet milestones. In response to the lack of bids, ConnDOT may break up the project or re-allocate the risk to lessen the risk burden on the contractors.

The Termination for Convenience Clause: A Powerful Weapon in Contractual Disputes

Dec 01 2007

By K&L Gates partner Jason L. Richey

Imagine a contractor who has done an outstanding job of building a magnificent skyscraper in the heart of one of the world’s largest cities. The skyscraper is 65% complete, expected to be finished on time and within budget. The contractor has not defaulted, and proudly touts that this construction project will be the centerpiece of the company’s accomplishments. Suddenly, the owner of the project notifies the contractor that it has been terminated from the job for the owner’s convenience. To complete the skyscraper, the owner replaces the contractor with one of its competitors. Can the owner unilaterally terminate the contractor even though the contractor was not in default? If so, what compensation is the contractor entitled to recover? The answer to these questions lies within the termination for convenience provision which has become increasingly common in private construction contracts.

Waiving Good-Bye to Consequential Damages: Drafting Effective Waivers in Today’s Marketplace

Dec 01 2007

By K&L Gates attorneys Jason L. Richey and William D. Wickard

Contractual provisions that mutually waive the rights of the owner and contractor to recover consequential damages have become common-place in today’s construction contracts. Effective waivers will expressly define the type of consequential damages the provision is intended to bar. Such a provision will allow courts and arbitration panels to dismiss all or part of a construction case at an early stage if the waiver clearly bars a demand for certain types of consequential damages. However, a broad consequential damages waiver that is improperly drafted may cause contractors and owners to expend significant time and money defending claims that seek damages for delay, lost profits or other damages commonly thought to only be “consequential.”

Contractual Indemnity Clauses In Construction Contracts

Dec 01 2007

By K&L Gates attorneys Timothy L. Pierce and R. Michael Viayra, Jr.

Express indemnity clauses are a common component in virtually all construction contracts, yet they are routinely included in such contracts without a full understanding of the risk transfer objectives of the parties or whether the indemnity clause fulfills those objectives. Indemnity clauses are risk transfer provisions whereby one party seeks to shift the risks of claims on a construction project down the line to the entity closer to the actual work. Typically such clauses transfer risk from the owner to the general contractor and subsequently to the subcontractors. This article examines the forms of indemnity clauses, issues often not specifically addressed in such clauses, jurisdictional limitations on indemnity provisions and the influence such clauses may have on additional insured coverage. Finally guidance is provided on ways to negotiate more effective indemnity clauses.

Allocating Risk In Today’s Marketplace: Tracking Trends in The Insurance Arena Affecting Contractors

Dec 01 2007

By K&L Gates attorneys Joseph L. Luciana, III and Thomas C. Ryan

Proper risk allocation is critical to the ultimate success of a construction project. And, the cornerstone of proper risk allocation for any construction project is a well-conceived and appropriately tailored insurance program. Too often, the concept of insurance remains an afterthought because contracting parties blindly rely on standard language in form agreements prepared earlier without fully investigating and understanding the current insurance market conditions. Moreover, most contractors do not want to consider the possibility of a disaster or another party’s failure to perform that may have project-wide implications.

Fourth Department Rules on Labor Law Claims

Nov 30 2007

Mulcaire v. Buffalo Structural Steel Constr. Corp., 846 N.Y.S.2d 838 (N.Y. App. Div. 2007)

In this case, a construction worker and a family member alleged Labor Law and common law negligence causes of action for injuries plaintiff sustained while installing floor decking in a building undergoing construction. Plaintiff slipped and fell through an uncovered opening approximately 18 feet to the floor. The trial court granted in part and denied in part plaintiffs’ motion for summary judgment, and denied defendants’ motion for summary judgment. Defendants appealed.