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.

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, because of the procedural history of the case,

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.

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.

Of course, reading the statutes is not sufficient to completely understand mechanic’s liens.

The City of Hartford Stadium Authority Has Terminated the Developer of Dunkin Donuts Park — Here’s What Comes Next

If you are a trade contractor or supplier working on Dunkin Donuts Park in Hartford, Connecticut, you have undoubtedly heard that the City of Hartford Stadium Authority (Authority) has terminated the developer and made claim against its insurer. Although the news reports are referring to the situation as an “insurance claim,” those reports are inaccurate. The Authority has submitted a bond claim. If your work is currently in limbo because of the Authority’s termination, your next steps depend upon how the surety that posted the subject bonds intends to respond.

As more fully explained below, there are different types of bonds that were most likely posted by the developer.

[T]here are important differences between performance bonds and commercial general liability contracts… The purpose of a performance bond is to guarantee the completion of the contract upon default by the contractor. Accordingly, suretyship is properly viewed as a form of credit enhancement in which premiums are charged in consideration of the fundamental underwriting assumption that the surety will be protected against loss by the principal.

Capstone Bldg. Corp. v. Am. Motorists Ins. Co., 308 Conn. 760, 791-792 (Conn. 2013). In other words, unlike an insurance claim that will be paid if based upon a covered loss,

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.

Only the “Owner” may seek Judicial Discharge of Mechanic’s Liens

The Connecticut Superior Court recently decided a case of first impression regarding the right to file an application for discharge of mechanic’s liens.  The court in Grade A Mkt., Inc. v. Surplus Contrs., LLC held that a lessee did not have “standing” to file an application for discharge of mechanic’s liens and dismissed the tenant’s application.  Grade A Mkt., Inc. v. Surplus Contrs., LLC, 2015 Conn. Super LEXIS 1342 (Conn. Super. May 26, 2015).  In layman’s terms, “standing” is the right to have the court decide your case.  The Grade A Mkt decision is interesting because it limits the ability of a tenant to obtain a discharge of mechanic’s liens even though the tenant’s lease with the owner may require the tenant to obtain a discharge of mechanic’s liens filed by contractors performing work for the tenant.

Mechanic’s liens are a statutory right that the legislature created to provide contractors and/or suppliers that furnish labor, materials, and/or services to a property with security for the alleged debt but mechanic’s liens were not intended to prevent the free transfer of property rights.  For that reason, the statutes provide a few different mechanisms by which an appropriate individual or company may obtain a release of the mechanic’s lien. 

Recent Supreme Court Case Teaches Important Lessons

It is no secret that public works construction is a difficult business.  On any given project there are innumerable ways that things can go wrong. With any project involving excavation and underground utilities, encountering changed conditions should not be a surprise.  Of course, such changed conditions are not the contractor’s responsibility.  What is the contractor’s responsibility, however, is providing the public owner with proper notice of its claims in accordance with the subject agreement.

One of the reasons public works construction projects are more onerous than their private counterparts is because public owners rarely negotiate contract terms. Contracts that are slanted significantly in the public owner’s favor are the norm.  Thus, as the contractor in a recent state Supreme Court decision learned, it is vitally important to read the contract and abide by its terms.

One of the lessons from Old Colony Cosntr., LLC v. Town of Southington, 316 Conn. 202 (Conn. April 21, 2015) is that general assertions of entitlement to damages and/or additional contract time is not sufficient when the contract requires more detail.  During the long duration of the project, the contractor in Old Colony repeatedly indicated that each problem that occurred impacted its schedule and costs. 

Changes to the Prevailing Wage Law Considered

According to Conn. Gen. Stat. §31-53, all public works construction contracts require the wages paid on the project to “be at a rate equal to the rate customary or prevailing for the same work in the same trade or occupation in the town in which such public works project is being constructed. Any contractor who is not obligated by agreement to make payment or contribution on behalf of such persons to any such employee welfare fund shall pay to each mechanic, laborer or worker as part of such person’s wages the amount of payment or contribution for such person’s classification on each pay day.”  The reason for the “prevailing wage” requirement is to level the playing field for those bidding on public projects by requiring non-union companies to pay the equivalent of union wages on such projects.  In the last legislative session, Connecticut lawmakers considered an expansion of the prevailing wage law beyond projects owned by the state or its subdivisions.

The considered legislation expands the prevailing wage law so that it would apply to any project which receives financial assistance from the state.  For example, if your project is funded—or even partially funded—by a loan or a grant from the State Department of Economic Development,

The Right to Arbitrate may be Waived if Opposing Party Suffers Prejudice

As discussed previously in this blog, arbitration is an alternative dispute resolution procedure, whereby the parties to a construction contract can agree to have their disputes heard by a private individual (or a panel of three individuals), whose decision is final and binding upon the parties.  Arbitration is favored by the Connecticut courts, and, when done correctly, can provide the parties with a fast, efficient, and economical resolution of their dispute.  The question, however, is to what extent may a party to a contract containing an arbitration clause avail himself of the courts before the right to arbitrate has been waived.  A recent Connecticut Supreme Court decision clarifies that situation.

In MSO, LLC v. DeSimone, 313 Conn. 54, the parties leave agreement included an arbitration clause.  The tenant, MSO, LLC, brought an action for damages against the landlord, DeSimone.  Id.  The landlord defended the action and brought a counterclaim against the tenant.  Id.  After two years of litigation, the landlord moved to stay the action pending arbitration.  Id.

If a motion to stay a lawsuit pending arbitration is brought pursuant to a valid agreement to arbitration, the court is without discretion to deny the motion.