Recent Decision Demonstrates the Importance of Complying with Contract Notice Provisions

A common provision in construction contracts requires a contractor to give notice to the owner within a certain number of days of an event giving rise to a claim. Such provisions have a reasonable basis insofar as they ensure an owner will have a reasonable opportunity to investigate the conditions for which a claim for additional compensation is being made. Traditionally, such notice provisions were not strictly enforced. The general approach seemed to be that — provided the owner was not prejudiced by any delay in giving notice of claim — a claim that was not submitted within the specified time limit would not be barred. The more recent trend, however, has been to more strictly construe such provisions.

 

In J. Wm. Foley, Inc. v. United Illuminating, the Appellate Court held that the contractor’s failure to submit its delay claim within the ten-day time limit specified by the contract was a bar to the claim. This decision is potentially troublesome for a couple of reasons: First, there is no reference to the owner suffering any prejudice as a result of the delay. Second, the decision indicated that the submission of the delay claim required a critical path analysis of the delay.

There are Times When Filing a Mechanic’s Lien May Not be the Best Option

As I have written before, a mechanic’s lien provides a contractor with an attachment to real property to secure the amount claimed due for work performed. However, before the mechanic’s lien can be successfully foreclosed and converted to a court judgment, the contractor has to prove the underlying contract debt. The benefits of the mechanic’s lien procedure is that it requires nothing more than the contractor’s sworn statement to be put in place. Essentially, in the case of subcontractor claims, the statutes allow a contractor to attach the property of the owner, who may not be aware of the claim, based upon nothing more than the contractor’s good word.

 

The trade off to the ease with which a mechanic’s lien can be put in place is that there are times where the mechanic’s lien is ineffective through no fault of the contractor. For example, an owner will have a defense to a subcontractor’s mechanic’s lien if it makes full payment to the general contractor before receiving notice of the lien. In addition, should the property not have sufficient equity to cover the amount of the debt, the court will award “strict foreclosure” and,

Possible Revisions to Connecticut’s Prevailing Wage Laws

Anyone involved with public construction projects is familiar with the term “prevailing wage,” which is generally understood to mean the minimum wages established by the government for each labor class that works on a given project. 29 C.F.R. § 1.2(a)(1). Connecticut’s prevailing wage requirements are far less onerous than the federal law, which apply to any project that costs more than $2,000. 40 USCS § 3142. Connecticut’s prevailing wage law only applies to new construction where the total cost of the work is $400,000 or more, and on remodeling or rehabilitation projects where the total cost of the work is $100,000 or more. Conn. Gen. Stat. § 31-53. Nonetheless, the state is currently considering increasing the project costs for which the prevailing wage law requirements will apply, i.e. the law’s threshold limits; indexing the threshold limits to inflation; and/or exempting certain public projects from the requirements entirely.

 

Given the disparity between the state and federal requirements described above and the proposed bills, it is interesting to consider the goals that the Connecticut state legislature intends to achieve. For all the bills that increase the threshold limits and/or exempt certain projects, the stated goals are to reduce costs for town public works projects;

There’s a New Proposed Law Regarding Emergency Services That Everyone Should Support

Parties are free to enter into contracts with any terms and conditions to which they both agree — but that right is not absolute. Certain contract terms are void by statute or case law based upon public policy considerations. For example, in Connecticut, the General Statutes do not allow contractors to prospectively waive their mechanic’s lien rights and the General Statutes do not allow contracting parties to have another state’s laws govern a dispute arising out of a construction project within Connecticut. However, the most onerous example of a statute that potentially voids an otherwise enforceable contract is the Home Improvement Act.

 

As previously discussed here, the Home Improvement Act can lead to unfair results. As upheld by the Connecticut Supreme Court, any contract that does not contain certain elements required by Conn. Gen. Stat. § 20-429 is unenforceable and the contractor that enters into such an agreement with an owner may also be held liable for a violation of the Connecticut Unfair Trade Practices Act. Under the terms of the Home Improvement Act, a contract that does not include notice of cancellation rights violates the statute. Thus, the owner of any home improvement project must be allowed three business days to cancel a home improvement contract after it is executed.

The Importance of Determining the Amount to Which You May Be Entitled After the Breach of a Construction Contract

Litigation is expensive. Before pursuing any particular claim, you need to determine if pursuing the claim makes economic sense. Standing on principle sounds good initially but often starts to seem like less of a good idea as the litigation costs mount.

 

The value of a claim is referred to as the “measure of damages.” In every lawsuit, the plaintiff has to prove that the defendant did something wrong that injured the plaintiff, i.e. establish the defendant’s “liability”; and the plaintiff has to prove the amount of money to which it is entitled to receive as a result of the defendant’s wrongful conduct to a reasonable certainty, i.e. establish the plaintiff’s “damages.”

 

Proving damages is just as important as proving liability. The failure of a plaintiff to prove its damages will result in the claims against the defendant being dismissed. See e.g. Shoreline Care Ltd. P’Ship v. Jansen & Rogan Consulting Eng’rs, P.C., 2002 Conn. Super. LEXIS 3715, *15, (Conn. Super. Ct. Nov. 15, 2002). In Shoreline Care Ltd. P’Ship, the project was constructed in phases but,

An Interesting Decision Discharges a Mechanic’s Lien

As discussed numerous times on this blog, the mechanic’s lien laws provide a security interest in privately owned real property in favor of those that improve it. According to Conn. Gen. Stat. §49-33, “[i]f any person has a claim for more than ten dollars for materials furnished or services rendered in the construction, raising, removal or repairs of any building or any of its appurtenances or in the improvement of any lot or in the site development or subdivision of any plot of land …then the plot of land, is subject to the payment of the claim.” While it is true that the type of work for which a mechanic’s lien may be enforced is sometimes subject to dispute, prior to the recent decision in CLW Real Estate Developments, LLC v. SAB Construction Management, LLC, the issue had been fairly well resolved.

 

Generally speaking, the types of services that support a mechanic’s lien are those that substantively improve the property. The Connecticut Appellate Court has “observed that a ‘mechanic’ has been defined as ‘a skilled worker who brings about a result by the use of tools, machines or equipment.’” Weber v.

Generally Speaking, Contracts That Can Be Terminated for Convenience Must Be Terminated In Good Faith

It is not uncommon for a construction contract between an owner and a general contractor to state the owner may terminate the contract for convenience. In other words, the owner may be allowed to terminate the contract even if the contractor had not done anything wrong merely because the owner has had a change in circumstance that no longer makes it reasonable to continue with the subject project. General contractors often include similar provisions in their contracts with their subcontractors. The question is whether there are any limits on one party’s right to terminate a contract when the other party has done nothing wrong. In most jurisdictions, there is a limit to such a right but, unfortunately, not in all.

 

The general rule was expressed by a Maryland an appellate court, which held “that termination for convenience rights … may be enforceable, subject to the implied limitation that they be exercised in good faith and in accordance with fair dealing.” Questar Builders, Inc. v. CB Flooring, LLC, 410 Md. 241, 279 (Md. 2009). By quoting David A. Senter, Role of the Subcontractor, in FUNDAMENTALS OF CONSTRUCTION LAW 133 (italics added),

A Mechanic’s Lien: Something Simple That’s Been Made Complicated

One of the first things I was ever taught about mechanic’s liens is that the legislation’s original intent was for a contractor to be able to perfect a mechanic’s lien without the aid of an attorney. If that’s true, the system is not working as intended. Of course, that is not surprising given the complicated legislation and its arguably inconsistent interpretation.

 

A mechanic’s lien is unique insofar as it allows a contractor to obtain an interest in real property without requiring any kind of hearing or notice. As long as the lien documents are properly prepared, recorded, and served, the lien is in place. In addition, the fact that mechanic’s liens have priority dates that relate back to the first day that the contractor performs work and/or supplies materials, mechanic’s liens that did not exist when a mortgage was given or the property was sold can appear on the land records after such transactions and take priority over an earlier filed mortgage and/or encumber property owned by someone who was not the property owner at the time the work was performed, materials were supplied and/or services were rendered.

 

An Owner’s Refusal to Issue Payment Might Amount to a Violation of the Unfair Trade Practices Act — But That’s Not Usually the Case

Litigation arising out of construction contract disputes obviously will include claims for breach of contract, but also tend to include claims that are based upon alleged violations of the Connecticut Unfair Trade Practices Act (CUTPA). Because there must be a good faith basis for any alleged claim, a set of facts should exist that reasonably supports any such allegations. However, given the requirements of a CUTPA claim and the frequency with such claims are alleged, a cynical person might suspect that CUTPA claims are often asserted merely as a way to circumvent the “American Rule,” which requires each party to be responsible for its own attorneys’ fees and costs.

The cost of litigation can make pursuing certain claims cost prohibitive. However, a plaintiff that prevails in a CUTPA claim may be awarded punitive damages and/or its reasonable attorneys’ fees and costs. Conn. Gen. Stat. § 42-110g. In addition, the mere threat of this additional liability may intimidate an opposing party into entering a settlement that it would not otherwise consider. Thus, alleging a violation of CUTPA may give a plaintiff a strategic advantage in litigation but such a claim is not likely to succeed in most situations.

Basing a Claim on the Total Cost Approach is Likely Throwing Good Money After Bad

Construction projects never go completely as planned. Construction managers, general contractors, subcontractors and suppliers all realize that changes in the work may be required for any number of reasons. For example, an area of the site may not become available due to the lack of an easement; there may be poor communication and/or coordination between trades; plans and/or specifications may contain certain deficiencies; critical shipments may be delayed; or, as allowed by most construction contracts, the owner simply may make design changes after the commencement of the work. One or more of the foregoing situations arises on almost every project. As a result, it is expected that construction schedules will be periodically updated during a project to address where the actual performance of the work was not completed in accordance with the original schedule.

 

Schedule revisions are so commonplace that some specifications require construction schedules to be updated on a monthly basis with two or three-week “look aheads” provided in between schedule revisions. The goal is not to complete the work in accordance with some original plan that Nostradamus would not be able to accurately create. The goal is to complete the work by the completion date no matter what problems arise.