When the Breach of a Construction Contract is not a Breach

The doctrine of substantial performance holds that a contractor’s breach of a construction contract does not entitle the owner to damages because the contractor’s performance was close enough to that which the contract required. “Technical violations are excused not because compliance [is] impossible, but because actual performance is so similar to the required performance that any breach that may have been committed is immaterial. Substantial performance occurs when, although the conditions of the contract have been deviated from in trifling particulars not materially detracting from the benefit the other party would derive from a literal performance, [the other party] has received substantially the benefit [it] expected, and is, therefore, bound to perform.” United Concrete Prod., Inc. v. NJR Constr., LLC, No. CV176011932S, 2018 WL 5733720, at *4 (Conn. Super. Ct. Oct. 17, 2018). The classic example of this doctrine is a situation where the contract specifies a product manufactured by Company A but the contractor provides the same product manufactured by Company B. Because the contract expressly stated that the product shall be manufactured by Company A, the installation of the same product manufactured by a different company is a breach of the contract. However, because the products are identical other than the name of the manufacturer,

Connecticut’s Procedure for Substituting a Bond for a Mechanic’s Lien Needs to be Changed

The purpose of a mechanic’s lien is to provide collateral for a contract debt. If you perform work on a project and are not paid, then the mechanic’s lien laws allow you to attach the property where the work was performed. In other words, a mechanic’s lien provides you with a property right you can foreclose in the same manner a bank can foreclose a mortgage. However, before you can force a sale of the property to collect your money, you have to prove you are entitled to the payment you claim. Therefore, a mechanic’s lien could be in place a long time.

Because the lien laws are intended to provide security for a debt, but are not intended to prevent the property from being transacted, most states, including Connecticut, have a procedure by which a surety bond can be substituted for a mechanic’s lien. The problem with Connecticut’s procedure is that it is too long and cumbersome.

While a mechanic’s lien is in place, a property cannot be refinanced, or sold – at least not without addressing the mechanic’s lien to a lender’s and/or buyer’s satisfaction. It is possible that the property might be refinanced or sold if the owner places the lien amount in escrow,

Here’s Some General Information for Those Wishing to File Their Own Mechanic’s Lien in Connecticut (Including a Mechanic’s Lien Form)

As a disclaimer, I don’t recommend that contractors file their own mechanic’s liens without the aid of an attorney. Every client and/or potential client that has ever come to me asking that I foreclose a mechanic’s lien that they filed on their own had some fatal defect. The reason for that is the arguably conflicting laws in the statutes and in the court decisions interpreting those laws.

A prime example of something that is not readily apparent by reading the mechanic’s lien laws is the notice and service requirements. According to our courts, “[r]ead together, [Sections] 49-34 and 49-35 [of the Connecticut General Statutes] require the [contractor filing the lien] to serve a copy of the certificate upon each owner of the property within 90 days after he ceased performing services or furnishing materials.” Steeltech Bldg. Prod., Inc. v. Viola, 2000 WL 726367, at *2 (Conn. Super. Ct. May 16, 2000). Of course, one may not reach that same conclusion reading [Sections] 49-34 and 49-35 on their own. According to Connecticut General Statutes § 49-34, “[a] mechanic’s lien is not valid unless the person performing the services or furnishing the materials [records a certificate of mechanic’s lien in the land records] within ninety days after he has ceased to do so…” However,

The Importance of Reading and Understanding Your Construction Contract

Everyone knows that they ought to eat right and exercise; yet, far too few of us do it. Similarly, proper construction contract management requires a contractor to thoroughly understand their contracts but many fail to do so. Of course, the reason that contractors are often largely ignored are understandable. Most construction contracts have the same substantive provisions with which contractors are already familiar; the specific requirements for any given project will be discussed at the preconstruction meeting; and the more specific details of any contract tend to only really matter in the rare occasions that the parties end up in a dispute they cannot resolve on their own. However, the few instances that result in litigation may make having proper practices in place for every project worthwhile.

On a positive note, most contractors that I encounter are now reading their contracts before signing them, as opposed to only reading them after a problem develops. As obvious as this may sound, actually taking the time to thoroughly read a contract before a project begins is the only way to be certain that you will fully comply with all your obligations. In addition, reading a contract before signing can prevent a contractor from experiencing an unfortunate surprise.

WHAT TO DO WHEN YOU ARE NOT BEING PAID

The most common issue I confront as a construction attorney is what to do when my client is not being paid. The standard approaches include sending a demand letter, making a demand for disputed funds to be placed in escrow in accordance with the prompt payment statute, and, of course, filing mechanic’s liens and/or bond claims. The larger issue becomes what to do when my client can no longer to perform its work without payment.

As a general rule, a contractor is better off completing its work, and then fighting about the monies due, as opposed to walking off the job. While it is true that there are Connecticut cases which hold that a contractor is excused from finishing its work if progress payments are not made when due, but reliance on such cases is fraught with potential problems.

If you ever forced to litigate, you want to be viewed as the one wearing the white hat. You want to be the injured party that is as pure as the driven snow. If at all possible, you do not want to give the other side any arguments to raise. Thus, if you walk off the job for nonpayment,

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. 

With Payment Bond Claims, Different Rules Apply to the Bond Claimant and the Surety

As previously discussed in this Blog, Conn. Gen. Stat. § 49-41 requires each general contractor on a public works projects valued over $100,000 to post a payment bond that guarantees payment to the general contractor’s subcontractors and suppliers.  The payment bond also guarantees payment to each subcontractors’ sub-subcontractors and suppliers.

The procedure by which such subcontractors, sub-subcontractors, and/or suppliers may make claim against such payment bonds is described in Conn. Gen. Stat. § 49-42.  With the exception of claims for retainage, the statute requires those making claim on the payment bond to submit their “notice of claim” within 180 calendar days after the last day that it worked and/or supplied materials.  The statute then provides the surety that issued the payment bond with 90 calendar days to pay or deny the claim.  Until recently, both time provisions were mandatory.  See Barreira Landscaping & Masonry v. Frontier Ins. Co., 47 Conn. Supp. 99, 110, 779 A.2d 244, 252 (Super. Ct. 2000)(holding that both the notice of claim and the surety’s response both much be made within the time specified by statute.)

With regard to the 90 day time limit, the court in Barreira Landscaping &

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. 

It is Not Always Clear Cut Which Services May Be the Basis of a Mechanic’s Lien

Conn. Gen. Stat. § 49-33 provides that those furnishing labor, materials or services for the improvement of real property are entitled to claim a lien on said premises.  “Prior to the statute’s amendment by the legislature in 1974, our cases construing the language of § 49–33 required, as a condition of lienability, that the work done be incorporated in or utilized in the building (or the appurtenance ) to be constructed, raised, removed or repaired.”  Santa Fuel, Inc. v. Varga, 77 Conn.App. 474, 482, 823 A.2d 1249, 1255 (Conn.App., 2003).  In 1974, the legislature amended Conn. Gen. Stat. § 49-33; however, “the 1974 amendment was not intended to expand the scope of [our mechanic’s lien laws] to include persons whose services do not enhance the property in some physical manner or lay the groundwork for the physical enhancement of the property.”  Nickel Mine Brook Associates v. Joseph E. Sakal, P.C., 217 Conn. 361, 363-364, 585 A.2d 1210, 1212 (Conn.,1991).  For that reason, numerous services pertaining to land cannot be the basis for a mechanic’s lien such as pipe removal, temporary electrical work, trash removal, cleaning services, and lawn mowing.  See Landscape Management Services, Inc.

A Connecticut Court Grants Defendant’s Motion To Stay An Application To Discharge Mechanic’s Lien Pending Arbitration

As regular readers of this blog know, a mechanic’s lien provides a contractor with a security interest in the real property where its work was performed.  Because, however, it is not the intent of the mechanic’s lien laws to restrict the free transfer of title of real property, there are two statutory procedures by which an owner may obtain a release of a mechanic’s lien.  Specifically, the property owner may seek to substitute a surety bond for the lien or the property owner may seek an order discharging or reducing the lien.  In CDO Properties, LLC v. Bogaert Construction Co., Inc., Docket No. CV 13-6018411 (JD of New London), the Court issued a decision staying the property owner’s application for discharge of a mechanic’s lien.  Based upon this decision, an owner’s attempt to promptly discharge a lien may be thwarted or delayed by a court and an owner may be forced to live with a lien until after arbitration.

The decision was based upon the Connecticut General Statutes, which require the court to stay any legal proceeding if the dispute is subject to an agreement to arbitrate.  Conn. Gen. Stat. § 52-409 states:

If any action for legal or equitable relief or other proceeding is brought by any party to a written agreement to arbitrate,