trade contractor Archives - Attorney Scott S. Orenstein

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,

A Contractor May Still Recover Monies Due For Work Performed Pursuant to an Unenforceable Contract

Despite what might appear to be the parties’ intentions, courts sometimes find contracts unenforceable. Courts may find contracts unenforceable for any number of reasons including, but not limited to, the contract omitting a material term; the contract having vague or indeterminate terms; the contract violating the statute of frauds; the contract lacking consideration; and/or the contract not reflecting the understanding of both parties. In those situations, a party that provides labor, materials, and/or services may still be entitled to receive payment for its work under the legal theories of unjust enrichment or quantum meruit.

“[U]njust enrichment and quantum meruit are alternative theories of restitution.” Nation Elec. Contracting, LLC v. St. Dimitrie Romanian Orthodox Church, 144 Conn.App. 808, 814, 74 A.3d 474, 478 (Conn.App., 2013). “Unjust enrichment applies whenever justice requires compensation to be given for property or services rendered under a contract, and no remedy is available by an action on the contract.” Gagne v. Vaccaro, 255 Conn. 390, 401, 766 A.2d 416, 424 (Conn.,2001). “Quantum meruit is the remedy available to a party when the trier of fact determines that an implied contract for services existed between the parties, and that,

Recent OCIP Decision Reminds Contractors About the Importance of Contract Language

In recent years, Owner Controlled Insurance Programs (“OCIP”) have become more prevalent in public and private construction projects. An OCIP “is a class of ‘wrap-up’ insurance that provides coverage for many construction project participants under one program.” Capstone Bldg. Corp. v. Am. Motorists Ins. Co., 308 Conn. 760, 767 (Conn. 2013). Such programs typically include commercial general liability insurance and worker’s compensation insurance. In general, OCIPs reduce a project’s overall cost because the owner does not have to pay the multiple layers of duplicative administration associated with the general contractor and each subcontractor having its own insurance coverage. The general understanding is that the project owner benefits from the savings but a recent Superior Decision reminds us that contractual duties and obligations are derived from the plain language of the contract and not what may reasonably inferred.

In Elevator Serv. Co. v. Reg’l Scaffolding & Hoisting Co., 2013 Conn. Super. LEXIS 687 (Conn. Super. Ct. Mar. 27, 2013), Elevator Service Co., Inc. (“Elevator Service”) and Regional Saffolding & Hosting, Inc. (“Regional Scaffolding”) entered into an agreement pertaining to a project known as the Royal Bank of Scotland (the “Project”). The issue before the court was whether Elevator Service had to pass along to Regional Scaffolding a discount that it received through the subject project’s OCIP.

Connecticut Statutes Provide Assistance with Receiving Prompt Payment on Public and Private Construction Projects

Under Connecticut law, an owner should pay its general contractor within 30 days of having received the general contractor’s application for payment; the general contractor, in turn, is required to pay its subcontractors and suppliers within 30 days of having received payment from the owner; and the subcontractors should then pay their sub-contractors and suppliers within 30 days of having received payment from the general contractor and so on down the line. See Gen. Stat. § 49-41a and Conn. Gen. Stat. § 42-158j.

The provisions in § 49-41a and § 42-158j are substantially similar except that:

1.) Only private owners are required to make payment to their general contractors within a specified number of days after receiving an application for payment; and

2.) The statute only applies to public projects for which a payment bond is required, which is any public works project whose contract amount exceeds $100,000.

Both statutes also have similar enforcement procedures. Either a subcontractor on a public project to which the statute applies or general contractors and subcontractors on a private project can make demand for payment by way of registered or certified mail and, within 10 days,

Public Owners Cannot Arbitrarily Award Contracts

Successfully protesting the award of a public construction contract is a very difficult. Under the public bidding laws, an unsuccessful bidder cannot obtain a monetary award against a public owner and its only recourse is to seek stop the public owner from awarding the contract to another bidder. The courts, however, will not stop a public owner from rejecting an apparent low bid and awarding the contract to another bidder unless the public owner engaged in fraud, favoritism or corruption.

For years, the public bidding laws protected the public owner’s ability to make any decision it deemed to be in its best interest provided it acted in good faith. As indicated in another post, that protection ended when the Connecticut Supreme Court held that it was possible for an unsuccessful bidder to obtain a monetary judgment against a public owner if the claim was based upon a cause of action that did not rely upon the public bidding laws.

More recently, a Connecticut Superior Court determined that a public owner can be held liable for money damages if it completely circumvents the public bidding laws. In CTTFB, Inc. v. City of Bridgeport, the court refused to overturn a jury verdict that awarded the plaintiff damages after determining that the City violated the Connecticut Unfair Trade Practices Act.

Scott Orenstein
03.03.2012
Construction Law, Construction Manager, Contract Law, Public Owner

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