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Construction Law Authority / Posts tagged "construction" (Page 7)

So, You Think You’re Protected Because You Have a Performance Bond

Well, you might not be. While you might have prudently thought ahead and gotten a performance bond from an entity downstream, to protect you from its defective work, the protection afforded by a performance bond only lasts so long. After some point, if you have not filed a lawsuit against the performance bond surety, you lose your right to make a claim and it is as if the performance bond never existed. As explained below, it might be relatively easy to determine the deadline for an owner to file a lawsuit against its general contractor’s performance bond surety, but calculating the deadline for a general contractor to file a lawsuit against one of its subcontractors’ performance bond sureties might not be so easy. A lawsuit against a performance bond must be filed within five years from the date the work at issue was completed and accepted, or the lawsuit will be...

Lien Laws & Out-of-State Construction Projects (Part II)


In the first part of this blog series, posted on August 4, 2011, we addressed differences between state laws on the protected class of construction lienors. Today, we’ll cover differences in contract provisions and required warnings or disclosures as prerequisites to lien.


As you venture out of state to find work, you should review the validity of the standard contracts your company sends to its clients, subs, and suppliers in light of local lien law requirements.


Most state statutes permit both oral and written contracts, but some states limit the enforceability of oral contracts. For example, many states (like Florida) require a contract to be in writing if a project cannot be performed in less than a year or involves the sale of goods exceeding $500. If you come from a state where all oral contracts are enforceable, you may be surprised if an oral contract is prohibited in another state.


“Pay if paid” clauses are also a big issue. Under these clauses, a contractor is not required to pay subs unless the contractor first received the corresponding payment from the owner. Some states freely enforce these clauses, while others prohibit them as against public policy; still others enforce them under limited circumstances.


There are many more examples of traps like these, so you must determine the enforceability of your company’s standard contracts before using them in unfamiliar states.

Lien Laws & Out-of-State Construction Projects (Part I)

 Like everyone else, your construction company is likely feeling the pressure of our prolonged economic downturn with no end in sight. Some states, but perhaps not yours, are starting to show small upticks in economic activity, possibly leading you to consider joining the tides of contractors looking for work in other states. As your company ventures into other territories, you apply your existing lien law knowledge to out-of-state projects. However, as your out-of-state job approaches completion, something goes horribly wrong. Perhaps there is a change order dispute with a sub who liens the project, causing the owner to withhold payment from you.

Naturally, you attempt to lien the project too. But the out-of-state lien law is drastically different than the one you know, resulting in an inadvertent failure to perfect your company’s lien rights. Even worse, your sub perfected its rights and was paid by the owner to satisfy their lien, so now you must defend the inevitable claim from the owner for sums paid to the lienor.


What went wrong? Your unfamiliarity with the out-of-state lien law gave your sub an unfair advantage when it perfected its lien for sums to which you believe it was not entitled. Your company’s ability to resolve the payment dispute was compromised by the loss of benefits otherwise provided by that particular state’s lien law. Unfortunately, this scenario happens all too often. As contractors expand their business into other states, they seldom consider the differences in lien laws from state to state. 


Although lien laws differ significantly, most generally address the same topics – so, with a little advance research, you can learn about the most pressing provisions and perfect your company’s rights in the future. This is the first in a series of blogs that will list various subjects usually covered by lien laws that you should research in foreign states before you begin a construction job there. Today we will begin with differences in the protected class of lienors.

Construction Contracting for the Owner – Types of contracts

There are several types of contracts which are used in between owners and contractors. The primary ones are lump sum contracts, unit price contracts, time and materials, construction manager and design-build.

Lump Sum:

A lump sum contract is the most basic agreement between a contractor and owner. The contractor agrees to provide specified services for a specific price. The owner agrees to pay the price upon completion of the work or according to an agreed payment schedule. T lump sum includes the costs of labor and materials and the contractor’s overhead and profit. The benefits of a lump sum contract for the owner are primarily that the costs are known at the outset of the project and the contractor has the risk if additional materials or time is needed.


Unit Price:

In a unit price contract a fixed price is established for each unit of work. A common example for condominium associations is a unit price for cubic feet of concrete repair on a balcony renovation project. This is useful as the price is set for the that unit of work.  Like a lump sum contract, the contractor is paid an agreed upon price, regardless of the actual cost to do the work. Unlike a lump sum contract the agreed upon price is usually for a small component of the work and not the entire project so the final cost may not be known at outset since the contract quantities at bid time are only estimates. Any contract for cost plus should require the contractor to keep careful records so as to be able to show quantities.


Time and Materials:

In a time and materials contract the contractor charges an hourly rate for labor, and there can be a certain percentage added to the materials and labor for profit. The perceived benefit for the owner is that they are not paying for any fluff that a contractor may build into the lump sum, and contractors are ensured that they will a fair profit. However, this contract shifts the price risks completely from the contractor to the owner. In the absence of checks and balances for the types of materials used and the actual time spent, including a guaranteed maximum price the owner could be giving the contractor a blank check.