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MINIMIZINGYour Risk +
AVOIDINGLegal Problems
Presented by Don GregoryJanuary 19, 2017
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TOP RISKSin Today’s Construction
1 Labor Shortage 30%
2 Contract Language22%
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Conditional
BIDSYour first – and
perhaps last – chance to make the rules.
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Did You Condition Your Bid?
This bid is conditioned upon the use of the ConsensusDOCS
750, AIA A401 or other subcontract language
acceptable to subcontractor
“
“
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Use ASA bid proposal form or similar language:
Favorable Conditions of Proposal:
+ Beginning work constitutes acceptance of bid
+ Change in material price by 5% or more warrants equitable adjustment
+ Not required to name additional insureds
+ Favorable payment terms
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Use ASA bid proposal form or similar language:
Favorable Conditions of Proposal:
+ Entitled to equitable adjustments for modifications to schedule, delays outside sub’s control
+ Entitled to rely on contract documents
+ Lien waivers exclude retainage and unbilled changes/claims
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Conditional
BIDSCan be incorporated into
the Subcontract scope (attach as exhibit A)
ORRetain leverage for
subcontract revisions
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Securing Equitable CONTRACT TERMS
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Killer Contract Clauses
Contingent Payment
No Damage for Delay
Waiver of Lien + Bond Rights
Unconditional Lien Waivers
Before Payment
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Killer Contract Clauses
Contingent Payment
No Damage for Delay
Waiver of Lien + Bond Rights
Unconditional Lien Waivers
Before Payment
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Contingent Payment
Pay-If-Paid
Pay-When-
Paid
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“Condition precedent”
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Progress Payment
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FinalPayment
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To be enforceable, must be clear + unambiguous
Pay-If-Paid
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If not drafted correctly, “benefit of the doubt” will go to subcontractor
Pay-If-Paid
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Unenforceable by statute in:
WI SC
DE
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Why have a mechanic’s lien statute when it can
be defeated with a Pay-If-Paid clause?
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Lehrer McGovern Bovis, Inc. v. Bullock
Insulation, Inc.Lien waiver and pay-if-paid
provisions are unenforceable based upon public policy favoring the
statutory right to a mechanic's lien
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Paid within a reasonable period of time
Pay-When-
Paid
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If owner fails to pay, payment on demand
Pay-When-
Paid
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Practical Pointers
Look for contracts with good payment terms
(Fixed payment terms, pay-when-paid)
Try to Insert Pay-When-Paid Language
(Use AIA A401 or ConsensusDOCS 750)
Modify Pay-If-Paid Language
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Killer Contract Clauses
Contingent Payment
No Damage for Delay
Waiver of Lien + Bond Rights
Unconditional Lien Waivers
Before Payment
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Not Enforceable Under Ohio’s Fairness
in Construction Contracting Act
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Sole remedy is a time extension
Generally unenforceable if –statute/case considers it against public policy or extent or nature
of delay was not foreseeable
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Killer Contract Clauses
Contingent Payment
No Damage for Delay
Waiver of Lien + Bond Rights
Unconditional Lien Waivers
Before Payment
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Contrary to popular belief, in many states an
“upfront” lien wavier (without independent
consideration like payment) is ENFORCEABLE
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Lien Waiver
Language
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Killer Contract Clauses
Contingent Payment
No Damage for Delay
Waiver of Lien + Bond Rights
Unconditional Lien Waivers
Before Payment
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Condition your lien waiver … followed by a trailing unconditional
lien waiver
SOLUTION
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ConditionalWaivers
Use Conditional Waivers for Progress Payments
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SigningWaivers
Be Careful When Signing Waivers for Partial Payment
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ProperNOTICE
Nobody likes itEverybody needs it
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Change OrdersIN WRITING
Avoid provisions that:allow one to direct additional work without agreement on price
make payment for additional work contingent upon payment by owner
allow “backcharges” without notice (ConsensusDOCS 750)
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Proper Notice
Risk of Proceeding Without Change Order or Written Direction
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Would love to perform the work without delay, but
YOUR contract makes me stop to get a change order
signed in advance!
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LANGUAGETo Protect Yourself
“Unless you indicate otherwise, we will proceed with the additional work as we were directed in the progress
meeting earlier today and this e-mail shall serve as continued notice of our
intention to receive additional compensation for this change”
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Don’t get burned by signing a change order with broad waiver language
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BE CAREFULWhen Signing Change Orders
Change Orders should just waive costs for that specific change rather than all possible extra costs through
the date of the change order
