“Time Is Money!” In Construction and This Is Why There Is a Liquidated Damages Provision
February 01, 2022 —
David Adelstein - Florida Construction Legal UpdatesIn construction, the adage “Time is Money!” rings true for all parties involved on a project. This includes an owner of a project that wants a project completed on time, i.e., by a substantial completion date. While substantial completion is often defined as when an owner can use a project for its intended purpose, this intended purpose typically equates to beneficial occupancy (in new construction) and other factors as identified in the contract.
The best mechanism for an owner to reinforce time and the substantial completion date is through a liquidated damages provision (also known as an LD provision) that includes a daily monetary rate for each day of delay to the substantial completion date.
A liquidated damages provision is not designed, and should NEVER be designed, to serve as a penalty because then it would be unenforceable. Instead, it should be designed to reasonably compensate an owner for delay to the substantial completion date that cannot be ascertained with any reasonable degree of certainty at the time the contract is being negotiated and executed. (Liquidated damages are MUCH easier to prove than actual damages an owner may incur down the road.) As an owner, you don’t really want to assess liquidated damages because that means the project is not substantially completed on time. And, in reality, a timely completed and performing project should always be better and more profitable than a late and underperforming project. However, without the liquidated damages provision, there isn’t a great way to hold a contractor’s feet to the fire with respect to the substantial completion date.
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Construction Defect Case Not Over, Despite Summary Judgment
November 07, 2012 —
CDJ STAFFThe Supreme Court of Oregon has concluded in an en banc decision that a motion to reconsider a summary judgment is not a motion for a new trial. In coming to their conclusion the court overturned an earlier Oregon Supreme Court case, Carter v. U.S. National Bank. Although the decision does not bear on construction defects, the underlying case did. Due to the decision, these claims can now be evaluated in a trial.
The case, Association of Unit Owners of Timbercrest Condominiums v. Warren, came about after an apartment complex was converted into condominium units. The developers hired Big Al’s Construction for some of the remodeling work. The condominium association later sued the developer and the contractor over claims of construction defects. The defendants filed a motion for summary judgment, which the court granted.
But that wasn’t the end of things. The plaintiff soon filed a “motion to reconsider,” noting that the summary judgment seemed to be in conflict with both law and other recent rulings, and additionally, the grounds for the decision were not in the order. The judge then notified the parties that the court had “pulled the trigger too quickly” and had seven questions for the parties to answer.
The court dismissed all claims against the defendants. The defendants filed their responses, objecting that that “‘there is no such thing’ as a motion for reconsideration.” Further, while “the rules do allow for post-judgment review of pre-judgment rulings through a motion for a new trial,” the plaintiffs had not filed for a new trial. But did they need one? They did file an appeal.
The judge in the case admitted that there was no such thing as a motion to reconsider, and felt bad about prematurely signing the judgment. The case was sent to the Court of Appeals to determine if the motion to reconsider was a request for a new trial. The Court of Appeals concurred.
In reviewing the decision, the Oregon Supreme Court concluded that there were a maximum of three questions to address. Was the motion for reconsideration a motion for a new trial? If so, was the later notice of appeal premature? And if so, was the plaintiff required to file a new appeal? The court determined that the answer to the first question was no.
Prior decisions pointed to the conclusion “that a motion for reconsideration of a summary judgment amounts to a motion for a new trial,” but here the court concluded that “our prior cases erred,” and turned to the summary judgment rule for clarification. The court noted that “the rule contemplates that summary judgment and trial are separate and distinct events.” With this conclusion, the Oregon Supreme Court remanded the case to the Court of Appeals for further proceedings.
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What Contractors Can Do to Address Rising Material Costs
August 23, 2021 —
Garret Murai - California Construction Law BlogFrom lumber to used cars to pastrami sandwiches, prices are rising. This past month, at a town hall meeting in Cincinnati, Ohio, President Biden acknowledged that inflation was increasing, responding to a question from a restaurant owner about labor shortages, “I think your business and the tourist business is really going to be in a bind for a little while.”
Although construction companies typically don’t work in the same small margins that restaurants do, labor shortages and material price increases have nevertheless impacted the construction industry. According to a recent report by Cumming, the cost of construction materials from lumber to steel to gypsum have gone up over the last 12 months, in some cases nearly double:
For contractors entering into construction contracts and those performing work under existing contracts, the increasing cost of materials and shortage of labor creates challenges, some of which can be addressed through contractual provisions and the framework of those contracts.
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Garret Murai, Nomos LLPMr. Murai may be contacted at
gmurai@nomosllp.com
The Hidden Dangers of Construction Defect Litigation
March 28, 2012 —
David M. McLain, Colorado Construction LitigationDavid M. McLain, writing at Colorado Construction Litigation, has an interesting blog post republishing his article in Common Interests magazine, the monthly periodical of the Rocky Mountain Chapter of the Community Associations Institute. In his article, he touches on a number of pitfalls in construction defect litigation, including the potential conflicts of interests facing HOAs. He also considers the problems homeowners can face, including both “strong-arm tactics” taken by attorneys to compel homeowners to join the lawsuit, or situations in which the interests of the HOA do not match those of the homeowners. He writes:
There is also a conflict of interest with individual owners who attempt to opt out of the case. This can lead to shocking strong-arm tactics on the part of plaintiffs’ attorneys. In one instance, a plaintiffs’ attorney sent a letter to an individual homeowner that stated that as a 1/58th owner of the common elements, if he refused to go along with the suit, and there was ultimately a finding in favor of the HOA which was in any way limited by his refusal to participate, he would be personally liable for 1/58th of the HOA’s total damages. In another instance, a different plaintiffs’ attorney sent a letter to a homeowner who wanted the builder to perform warranty repairs, informing the owner that if he let the builder perform any repairs, the attorney would bill the HOA according to the fee agreement entered by the HOA board (without knowledge or consent of non-board members) and that the HOA would assess the homeowner for that expense. These are just two examples of conflicts which may arise between the HOA board and individual homeowners when the HOA pursues CD cases.
Another example of a conflict which will arise as a result of CD litigation occurs post-settlement. When an HOA settles for less than 100% of the amount necessary to fund all repairs outlined by its experts, plus attorneys’ fees and litigation costs, there will obviously be a shortfall in the amount necessary to fix the development. The HOA board must then choose to impose a special assessment to cover the shortfall or to make some, but not all, of the repairs outlined by its experts. In choosing the latter, the conflict arises with respect to which homes get fixed and which do not. In this situation, the HOA board has acted as the attorney-in-fact for the individual owners by bringing claims on their behalf, and has compromised those claims without their knowledge or consent.
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Reprinted courtesy of David M. McLain of Higgins, Hopkins, McClain & Roswell, LLC. Mr. McClain can be contacted at mclain@hhmrlaw.com.
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COVID-19 Business Interruption Claims Four Years Later: What Have We Learned?
September 23, 2024 —
Patrick McKnight - The Dispute ResolverFour and half years ago the COVID-19 pandemic spread around the globe, bringing with it interesting, but challenging, legal problems for construction attorneys. Construction projects ground to a halt. Ever-changing guidance from authorities ranging from the U.S. Department of Labor to local health authorities resulted in a web of evolving obligations for general contractors and subs alike. One of the most closely watched legal questions was the wave of business interruption claims filed by plaintiffs, many of whom owned businesses impacted by government shutdowns. During the opening months of the pandemic, I
noted that hundreds of business interruption claims had been filed by insureds across the country. At that time, the only thing certain was that although the outcome remained unknown, virus exclusions were likely to become more likely in the future. Needless to say, much has happened since early 2020.
What does the data say about the outcome of business interruption claims?
In sum, plaintiffs have had an uphill battle. A helpful resource for analyzing the outcome of business interruption suits is the
Covid Coverage Litigation Tracker (“Tracker”), an insurance law analytics tool offered by Penn Carey Law of the University of Pennsylvania. According to its website, “[t]he Covid Coverage Litigation Tracker is a multi-sourced database and dashboard through which to view the unfolding insurance litigation arising out of the pandemic in federal and state courts. Widely cited in briefs, judicial opinions, and the press, the tracker also serves as a proof of concept for new methods to identify, track, and understand emerging case congregations in real time.”
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Patrick McKnight, Fox Rothschild LLPMr. McKnight may be contacted at
pmcknight@foxrothschild.com
No Coverage for Homeowner Named as Borrower in Policy but Not as Insured
July 08, 2024 —
Tred R. Eyerly - Insurance Law HawaiiThe magistrate judge recommended that the homeowner's complaint seeking coverage for damage caused by Hurricanes Laura and Delta be denied because the homeowner was only named as the borrower under the policy. LeDay v. Integon Nat'l Ins. Co., 2024 U,S. Dist. LEXIS 87369 (W.D. La. April 15, 2024).
When the homeowner sought coverage for hurricane damage, it was denied. The homeowner then sued and Integon moved to dismiss. Integon argued it did not issue a policy to the homeowner, but the policy was issued to Midland Mortgage. The pro se homeowner did not respond to the motion.
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Tred R. Eyerly, Damon Key Leong Kupchak HastertMr. Eyerly may be contacted at
te@hawaiilawyer.com
Is Arbitration Always the Answer?
April 20, 2016 —
Christopher G. Hill – Construction Law MusingsAfter a long (for me) hiatus due to Spring Break with my wonderful family followed by a crazy last two weeks for both personal and business reasons, I’m back and ready to muse again.
This week’s “musings” concern a topic that arises often in construction contracts and construction dispute resolution. The topic? Arbitration. Why does this come up often? Because in many form contracts such as the AIA documents, as well as in many construction contracts that are more specifically tailored, mandatory arbitration is at least a choice if not the only method of dispute resolution.
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Christopher G. Hill, Law Office of Christopher G. Hill, PCMr. Hill may be contacted at
chrisghill@constructionlawva.com
Construction Picks Up Post-COVID and So Do Claims (and A Construction Lawyer Can Help)
September 12, 2022 —
Christopher G. Hill - Construction Law MusingsI’m a construction attorney and proud to be one. Over the past couple of years, my expertise (and that of my fellow members of the Virginia construction bar) has been challenged by everything from COVID-related shutdowns to supply chain issues to unanticipated price increases. With each of these obstacles placed in front of my clients and friends in the Virginia construction industry, I have gotten calls and questions as to how to best handle the various issues facing the construction world.
Needless to say, changes in price or material availability occurring between the date of a contract’s signing and the (likely delayed) start or completion of the contractual scope of work have caused some consternation and claims. Many of these claims did not come forward or reach my, or others, desk until after the world reopened post-COVID and construction began to speed up and money started to be owed. While one “easy” answer, particularly for those “upstream” in the payment chain, is “tough luck, you gave me a fixed price, signed a contract, and we expect you to honor it,” this may not be the best and most practical way to get the job done.
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The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
