Here’s an article on my firm in Construction Business Review:
https://www.constructionbusinessreview.com/gerber-ciano-kelly-brady-llp
Generally speaking, the legal profession is not currently held in high esteem. In my opinion, there are a couple of reasons for this situation. First, I believe that the general public does not fully understand the adversarial process used in our legal system or the reasons why lawyers are allowed to “argue in the alternative,” which, in normal parlance, would negatively be referred to as talking out of both sides of your mouth. Second, the negative public opinion is (unfortunately) deserved by virtue of how some attorneys approach their cases.
Attorneys that draft complaints that go beyond any reasonable interpretation of the facts hurt themselves and the legal profession as a whole. I once received a complaint that was far beyond the pale because, in a case where a subcontractor asserted a claim for nonpayment, the attorney not only alleged breach of contract, but also asserted a human rights violation against my client because the subcontractor was a Minority Business Enterprise (“MBE”) and my client was allegedly a racist. Of course, my African American client and I had a good laugh when I called to let her know that she was being accused of being a racist. (Practice tip to new attorneys: If you are going to make a claim based upon race,
As most contractors know, if they are not paid for their work, they are entitled to file a mechanic’s lien against the property where the work was performed. While the main purpose of a mechanic’s lien is to provide security for the debt, it can be a powerful tool in helping contractors receive payment. However, the reasons why filing a mechanic’s lien can result in a contractor receiving payment are not widely understood, and, for that reason, contractors may inadvertently waive all or some of their rights.
A mechanic’s lien is an attachment to “real property,” which is similar to but not exactly the same as a mortgage. Like a mortgage, a mechanic’s lien is recorded on the land records. Unlike a mortgage, however, a mechanic’s lien’s “priority” may not be based upon the date it is recorded. Thus, a property owner may need to discharge a mechanic’s lien to refinance, to avoid a default on its mortgage and/or to convert a construction loan into a regular mortgage. Therefore, an owner’s potential need to obtain a lien discharge may result in a contractor receiving payment.
Generally speaking, mortgages and liens (other than mechanic’s liens) take effect on or have “priority” from the date they are recorded.
As I have often stated, any settlement you can live with is far better than the result an attorney will achieve for you at trial. Trials are time consuming and expensive, and, no matter how good your case is, there is no guarantee what the result will be when you let an arbitrator, judge or jury decide your fate. In addition, it is not productive for you and your employees to spend weeks away from your current projects to prepare for and attend a trial intended to resolve a dispute from a job that has long been completed. Thus, even a “win” at trial may not be considered a true success once you add in all the ancillary costs.
In light of the foregoing, for a case to go to trial, at least one of the parties must have an unreasonable valuation of the case. For example, I once defended a contractor from a subcontractor’s lost productivity claim that greatly exceeded the subcontractor’s actual costs. The subcontractor’s lost productivity claim was based upon a Measured Mile Analysis that purportedly determined that the subcontractor suffered $27 million in damages. However, the subcontractor’s financial statements indicated that its total loss was only $12 million.
Right now, more than half the states and the federal government have some version of a False Claims Act that is applied to the construction industry. In general, a False Claims Act allows the government to impose civil penalties for presenting what are determined to be “false claims.” The federal False Claims Act imposes a civil penalty upon anyone that knowingly presents a “false” claim to the government that shall be “not less than $5,000 and not more than $10,000 … plus 3 times the amount of damages which the Government sustains because of the act of that person.” (Emphasis added) 31 U.S.C.S. § 3729. Using the federal statute as an example is appropriate because most of the states that have their own False Claims Acts have modeled their statutes after the federal act’s requirements, penalties, and interpretation, and the states that are in the process of developing such acts are likely to do so as well. That’s important because the federal act does not specifically define “fraud” and there is no requirement in the federal act for a claimant to have a specific intent to defraud the government before a claimant can be found liable.
Scott Orenstein
(203) 640-8825
CONSTRUCTION CONTRACT DISPUTE PRACTICE GROUP
During a construction project, many different types of disputes may arise between the parties. A contractor may claim entitlement to additional contract time and/or additional compensation because of changed conditions, extra work, delay, acceleration, lost productivity, defective plans and specifications, and the like. Similarly, an owner may claim damages for defective work and/or a contractor’s failure to complete the work on time. In addition, the owner or the contractor may have reason to make claim against the project’s architect or engineer due to a deficient design and/or a failure to properly provide construction administration services.
Our Construction Contract Dispute Practice Group typically assists general contractors, construction managers, subcontractors and/or suppliers with any of the foregoing issues, but occasionally we assist owners and/or design professionals as well.
CONTRACT REVIEW
Today, having good, written contracts is a must. No longer should anyone rely upon “handshake” or verbal contracts. Verbal agreements are legally binding, but the lack of a written contract increases the potential that the parties may disagree upon their respective duties and obligations.
The Appellate Court has issued an opinion that arises out of a very common situation on a construction project – the late delivery of materials. The decision is insightful with regard to understanding a general contractor’s obligations when such a situation arises. In addition, the decision describes how a single instance of improper conduct can lead to an unfair trade practice. Finally, the decision provides a reminder that, if you go to trial, no specific outcome is guaranteed no matter how straightforward you may believe the law to be.
In United Concrete Products, Inc. v. NJR Construction, LLC, the defendant general contractor, NJR Construction, LLC (“NJR”) had entered into a contract with the Department of Transportation, whereby NJR had agreed to replace a bridge over the Hockanum River (the “Prime Contract”). United Concrete Prods. v. NJR Constr., LLC , 207 Conn. App. 551, 555-58 (2021). The Prime Contract allowed NJR an 8-week window to perform the bridge replacement work during which time the road would be closed to through traffic. Id. The Prime Contract further provided a bonus for the project’s early completion and liquidated damages for the project’s late completion.
In poker, you have to play the cards you are dealt, but, if you have a bad hand, you can fold. In litigation, if you do not have a strong argument, you should negotiate a settlement, but that is not always possible because the opposing party’s demands may be so unreasonable that you might as well go to trial and see what happens. It is at those times where an attorney might attempt to get creative. Recently, our Appellate Court upheld a trial court decision that held a surety liable on both a payment bond and a mechanic’s lien substitution bond despite the nine special defenses that it raised. See O & G Indus. v. Am. Home Assur. Co., 204 Conn. App. 614 (2021). Some of these special defenses were novel, and, as a result, this decision gives us some greater insight into lien and bond claims.
In O & G Indus. v. Am. Home Assur. Co., the plaintiff brought an action against a surety that had issued both the subject project’s payment bond and a bond that was substituted for the plaintiff’s mechanic’s lien. Id. By way of brief background,
I have often heard many people say that they did not have a contract and/or change order when they actually meant that they did not reduce their agreement to writing and/or sign a written document. Whenever someone performs work in exchange for a promise of payment, they have a legally enforceable agreement. The question is whether the contract was verbal or written.
There are two areas where the issue of not having a fully executed written agreement repeatedly arises in construction. The first is when the parties exchange a written contract but do not fully execute it, and the second is when the parties ignore the requirement in their contract that any changes in the work only be performed pursuant to a written change order. In both these cases, there can still be an enforceable verbal contract.
As you might expect, having a written contract is often better than a verbal, which is why there are many publicly available forms that can be obtained for construction projects. The American Institute of Architects (AIA) produces the most well-known and widely used forms of agreement, but there are competitors that offer similar (if not better) products. The point is that there is no excuse for not having a signed written agreement for any construction project,
Change order provisions, which appear in most constructon contracts and contemplate changes being made to the work, contradict a fundamental premise of contract law. Specifically, in order for there to be a legally enforceable agreement, “there must be mutual assent or a meeting of the minds.” C.A.D.S., LLC v. Sundance Realty, LLC, 2019 Conn. Super. LEXIS 29, *25 (July 2, 2018). A contract is supposed to be “based on an identical understanding of the parties.” Id. at *25-26. Yet, as anyone in construction is aware, the project owner may order changes during the performance of the work that the contractor is contractually bound to perform, subject to appropriate adjustments in monetary compensation and the time to complete the work.
Notwithstanding the foregoing, there are limits in an owner’s ability to order changes in the work, because the owner is not allowed to require a contractor to perform “cardinal changes.” “A ‘cardinal’ change is a change outside the general scope of the contract.” Philip L. Bruner & Patrick J. O’Connor, Jr., Bruner & O’Connor on Construction Law § 4:13. The significance of a cardinal change is that it is not covered by a standard change order provision.