Every 10 years, the American Institute of Architects (AIA) releases updated editions of its flagship design and construction agreements, the most recent of which AIA published in 2017. The 2017 revisions were unexceptional. For the most part, commonly negotiated...
Construction Law
Construction Lawyer Mark Rysberg Joins CFMA Publications Advisory Group
Attorney Mark Rysberg has joined the Construction Financial Management Association’s Publications Advisory Group, which focuses on maintaining the high standards of CFMA Building Profits article content and advertising, as well as the usage of CFMA BP Online – the...
Leipprandt Appointed Co-Chair of the State Bar Association of Michigan Construction Law Committee
Hilger Hammond, PC is pleased to announce that Aileen Leipprandt has been appointed as co-chair to the State Bar of Michigan Construction Law Committee. The Construction Law Committee is a special subcommittee of the Real Property Law Section of the State Bar. The...
Contractor Stung By Liquidated Damages
The recent case of Abhe & Svboda Inc. v MDOT (Court of Appeals, August 2017), underscores the difficulty in challenging Liquidated Damages, particularly where a contractor does not comply with delay claim provisions.
This case arose from the late completion by Abhe & Svboda, Inc (ASI) of a contract with the Michigan Department of Transportation (MDOT) to clean and paint part of the Mackinac Bridge. The contract specified Liquidated Damages (LDs) of $3,000 a day for each day of late completion. The contract also gave ASI the right to seek a time extension for bad weather, provided that ASI asserted the request within the time period required by the contract. ASI did not timely complete the project and the State assessed LDs of about $1.9 million for being 644 days late.
ASI sued the State challenging the LDs assessment for a number of reasons. For instance, ASI argued that the LDs should not apply to 362 days of the planned winter shutdown during which it was impossible for MDOT to suffer any losses and that the LD clause was void for failing to be a good-faith effort to estimate losses. ASI also argued that MDOT’s dilatory behavior in approving ASI’s scaffolding plan caused 56 days of delay. ASI argued that 459 days of work were caused by environmental circumstances beyond its control. The trial court rejected all of ASI’s arguments and granted summary disposition to the State. ASI appealed.
Construction Contract Clauses, Part 7 – Indemnification and Insured Contract Coverage
Indemnification provisions frequently appear in construction and commercial contracts. They operate to shift risk from the party being provided indemnification to the party providing indemnification. The principle behind such risk shifting is to shift potential risks onto the party or parties that are best able to prevent, mitigate, or insure those risks. In that respect, indemnity provisions do not necessarily need to be a source of disagreement during contract negotiation.
Consider, for example, indemnification provisions that require one party to indemnify and defend other parties from the risks relating to personal injury and property damage. At first blush, the party who is to provide such indemnity may feel that they should not assume those risks. However, agreeing to a well-drafted provision requiring indemnification for personal injury or property damage can be a benefit to all of the parties—including the party providing the indemnity. Here is how that can occur.
Construction Contract Clauses, Part 6 – Waiver of Claims for Insured Losses
Many insurance sections of construction contracts contain language whereby the parties involved in the construction project waive all claims against all other parties involved in the project for insurable losses such as property damage and personal injuries.
Owner and Contractor waive all rights against each other and their respective officers, directors, members, partners, employees, agents, consultants and subcontractors of each and any of them for all losses and damages caused by, arising out of or resulting from any of the perils or causes of loss covered by such policies and any other property insurance applicable to the Work; and, in addition, waive all such rights against Subcontractors and Engineer, and all other individuals or entities identified in the Supplementary Conditions as loss payees (and the officers, directors, members, partners, employees, agents, consultants, and subcontractors of each and any of them) under such policies for losses and damages so caused.
Construction Contract Clauses, Part 5 – Conversion Clauses
A conversion clause arises in the context of contract termination. There are generally two types of termination; termination for cause and for convenience. Each type of termination differs with respect to the basis for termination, as well as the limitations on payment rights the terminated party retains post-termination. A conversion clause operates to convert a wrongful termination into a termination for convenience. The following is an example of a conversion clause.
If it is determined, by litigation, arbitration or otherwise, that termination for default was unjustified for any reason, the termination shall be deemed a termination of convenience and Subcontractor’s remedies shall be limited to those provided for as a termination of convenience.
Labor Under the Federal Miller Act: The Known Unknown
Here’s what we know. On federal projects, the Miller Act requires prime contractors to furnish a payment bond “for the protection of all persons supplying labor and material in carrying out the work provided for in the contract for the use of each person.” The Act authorizes “every person that furnished labor or material in carrying out work provided for in a contract” who has “a direct contractual relationship with a subcontractor but no contractual relationship, express or implied, with the contractor furnishing the payment bond may bring a civil action on the payment bond.”
Further, we know that the Act is “highly remedial in nature” and “entitled to a liberal construction and application in order properly to effectuate the Congressional intent to protect those whose labor and materials go into public projects.” However, while liberally construed in favor of subcontractors, the Miller Act is not without limit.
Beyond notice, timeliness, and venue requirements, which are all necessary elements to state a prima facie claim for relief under the Miller Act, many forget to analyze the obvious: whether the subcontractor performed “labor” within the purview of the Miller Act. Despite the ostensibly inclusive language in the Miller Act requiring a bond for the protection of all persons supplying labor and materials in carrying out the work, several federal courts have imposed limits on the types of work constituting “labor” on construction projects.
Unlicensed Builder Beware
Michigan Supreme Court Gives Homeowners Exclusive Power of Avoidance When Contractor Lacks License By Suzanne Sutherland The Michigan Supreme Court recently issued a decision that determined if an unlicensed builder is entitled to payment when he makes a...
A Potential Pothole in the Paving – Proposed Changes to Paving Warranty Obligations
Helpful information about 2015 legislation on Michigan’s paving updates.