Top 50 Construction Law Firm

“Force majeure clauses became a hot topic once the COVID-19 pandemic became a reality. A force majeure clause is a contract provision that addresses the parties’ rights and obligations when an unexpected or uncontrollable event occurs, such as an Act of God (i.e., earthquake, flood), war, terrorism, labor strike, or a government shutdown due to a pandemic. Not all construction contracts contain force majeure clauses, although many include some version even if not labeled as such.

Standard construction contract language provides that the parties are typically not relieved of their obligations to perform should such an event occur but may suspend performance until the circumstances change. Many provisions allow for a reasonable time extension to perform and some, not all, provide for additional monetary costs to be paid for any associated damages as a result of the suspension of performance.

It is important to carefully review your construction contract for any force majeure provisions to determine your rights and obligations. In negotiating future contracts, it is important to consider any proposed force majeure provisions in light of recent events. Project owners hoping to contain their project costs are often incentivized to only allow for time extensions but no increase in additional contract sums to the contractor. On the other hand, contractors considering the uncertainty of the impact of a suspension of work due, for example, to a government shutdown from both a time and increase in costs standpoint should negotiate as much flexibility as possible.”

“The pandemic created a period of slowed/stopped projects and uncertain futures. This brought to the forefront of many subcontractors’ minds the need to make sure all pre-lien notices are sent on every project.

Subcontractors can be reluctant to exercise their lien rights or to send pre-lien notices. They think it will anger the general contractor or make it more difficult to obtain payment, as it may make the general contractor look bad. But in reality, subcontractors have to serve pre-lien notices because they never really know what may happen on a project. The pandemic has illustrated that perfectly. Even if everyone involved in a project is honorable, the work is running smoothly and the money is flowing freely, the project can still be brought to a screeching halt due to forces outside of everyone’s control. In those circumstances, subcontractors wish they had their lien rights secured.

Subcontractors should exercise their pre-lien rights, and if they receive push back, they should use the pandemic as an example of why they are doing so. Pre-lien notices and similar documents are not a poor reflection on a project. If anything, they are indicative of a subcontractor who is on top of details and paperwork—good qualities to have for a project of any size.”

“Contractors need to protect themselves from unanticipated construction job costs. This is most effectively accomplished by including in the contract documents a process identifying and allocating risks and establishing a procedure for resolving them. This should be accomplished during contract formation, including such risks as force majeure, indemnification for losses and damage incurred by a third party, labor laws controlling payment, differing site conditions, unanticipated delays, and discovery of defective design problems.

An essential tool for accomplishing this is contractor input into the project schedule. Frequently, the owner simply provides a schedule of work activities without first consulting with the subcontractors who are in the best position to identify problems with the proposed sequence and duration of work activities. Early schedule input from subcontractors results in a fully integrated schedule, which greatly alleviates unanticipated costs.

The use of Requests For Information (RFI) to identify and resolve potential problems is another tool for controlling costs. Costs can also be more appropriately controlled if the contract sets a recurring time for scheduled meetings between all the parties to identify progress on the schedule and pinpoint potential conflicts before they arise.

Lastly, the contract should provide a procedure for identifying and tracking actual or constructive changes to the project performance schedule so contractors can track unanticipated costs against schedule performance and resolve disputes at the earlies opportunity.”

“For many of us the first decision of the morning over the past 14 months was, “sweatpants or shorts?” Attorneys quickly came to the realization that under proper circumstances working remotely does not equate to reduced productivity or ineffective results. While pre-pandemic virtual meetings and depositions were not necessarily uncommon, virtual arbitrations necessitated by COVID-19 undoubtedly raised the bar. While many believe a hybrid approach to virtual and in-person meetings, depositions, and mediations is around for the long haul, the logistics and complexities associated with a document-intensive construction arbitration is a tougher sell. There is no easy answer and certainly opinions vary.

Clients appreciate the fees and cost savings by eliminating travel. Many involved, including the tribunal, appreciate the increased ease of scheduling and eliminating the need to find space to accommodate the parties, especially in large, multi-party construction arbitrations.

There are challenges to a remote arbitration. I weigh heavily on human interaction - feeling the energy in the room, eye contact, body language, and seeing firsthand the tribunal’s reactions. Will the spoken word over a computer screen be persuasive? Do remote communications temper egos and emotion and result in less confrontation? Can experts convey their technical opinions effectively? Will the effective use of mock-ups as evidence be reduced or eliminated? Is the message at risk? Will confidentiality be preserved?

Technology and software is key - glitches and distractions need to be minimized. Camera angles, lighting and sound are significant considerations. Planning and protocols, including for presentation of evidence and exhibits, must be clear and agreed upon. Remain aware of the Administrator’s Rules in place governing the virtual process. Remote construction arbitrations? An art, not yet a science. Time will tell.”

“When a contractor considers retaining a law firm, two factors stand out: Experience and communication skills. Experience includes significant time devoted to the area of law as well as time learning the processes, roles, and responsibilities of all the parties involved in construction projects. Experienced law firms have worked with all types of stakeholders, drafting and interpreting all types of agreements construction projects may require. An experienced firm will have worked with clients to resolve of a wide range of problems that can arise with projects of a variety of sizes and levels of complexity. A contractor wants a firm that understands the roles of insurance and technology. While significant experience with litigated and arbitrated resolutions is essential, a contractor should also make sure the firm understands how to find reasonable resolutions without the help of judges or arbitrators.

A good firm should welcome tough questions about its results and provide examples. A good construction firm must also have effective communicators. This means lawyers with an ability to understand their audiences and tailor communications accordingly. It also means having lawyers who are careful listeners and ask thoughtful questions. Legal counsel must have the abilities to effectively explain and persuade in person and in writing. This goes beyond eloquence and includes self-awareness and the ability to read people and circumstances.”

“Contractors should be aware under federal law and some states’ laws, a prime contractor is required to pay its subcontractors and material suppliers within a certain period of time after getting payment by the owner. If payment is not made by a contractor within the prescribed time period, the contractor may be subject to penalties under state or federal law consisting of interest (on the amount owed) or attorneys’ fees incurred in enforcing the law. There are often exceptions to the requirement to pay a subcontractor or supplier, such as if the subcontractor’s or supplier’s work is defective.

As an example, under the Federal Prompt Payment Act, a prime contractor is required to pay its subcontractors and material suppliers within seven days of receiving payment by the government agency that owns the project or the prime contractor may be required to pay interest on the amount not timely paid.

If you are a prime contractor on a construction project, it is best to know the law governing any subcontract agreements and (1) whether that law requires payment to subcontractors within a certain time period; (2) what the exceptions to the payment obligations to subcontractors are under your contact and the law; and (3) what the penalties are for failing to timely pay subcontractors. If you have questions about any prompt payment obligation, you should speak with an experienced attorney familiar with the law.”