Claims & Disputes

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In Nova Contracting, Inc. v. City of Olympia, No. 94711-2 (Wash. Sept. 29, 2018), the Washington Supreme Court, sitting en banc, ruled in favor of a municipality on the issue of whether the general contractor complied with a contract’s notice of claim provision.  Relying on Mike M. Johnson, Inc. v. Spokane County, 150 Wn.2d 375, 78 P.3d 161 (2003), the court in Nova Contracting held that a broad notice of claim provision (waiving “any claims” for noncompliance) (a) mandates written, rather than actual, notice of claims and (b) applies not only to claims for cost of work performed, but also to claims for (i) expectancy and consequential damages and (ii) breach of the covenant of good faith and fair dealing.  Slip op. at 2-3, 15.

The case arose from certain disputes between the City of Olympia (the “City”) and a contractor (“NOVA”) in connection with a public works contract in which the contractor agreed to replace an aging cement culvert. The contract contained a “notice of protest” provision from the Washington State Department of Transportation’s standard specifications.  This provision required the contractor to “‘give a signed written notice of protest’ ‘[i]mmediately’ if it ‘disagree[d] with anything required in a change order, another written order, or an oral order from the [City] Engineer, including any direction, instruction, interpretation, or determination by the Engineer.’” Id. at 1-2.

Experienced project developers know that managing risk on a major project involves initial planning, design, construction, and commissioning. These tasks call for different skill sets — making it tempting to think of them as separate — but they need to be coordinated to prevent the creation of troublesome gaps in areas of responsibility. In my…

President Trump’s new tariffs and ongoing trade negotiations concerning building commodities like steel, aluminum, and lumber have resulted in uncertain market conditions for those in the construction industry, making it nearly impossible for owners, developers, contractors, and suppliers to accurately analyze and allocate risks during construction contract negotiations. In my latest article for the Daily…

In February 2018, the Oregon Legislature attempted to push through House Bill 4154, which would have made a general contractor liable for unpaid wages, including benefit payments and contributions, of an employee of a subcontractor at any tier, after that employee files a wage claim and the Commissioner of the Bureau of Labor and Industries…

The condominium embodies a missing price point in Seattle’s real estate market. As a result, we have noticed an uptick in the number of developers seeking legal advice regarding the potential risks associated with condominiums. In my first article for the Daily Journal of Commerce, I provide an update on Washington’s condominium laws, a…

During Seattle’s current construction boom, general contractors and subcontractors may be concentrating more on finalizing work on their projects than on worrying about the niceties of their construction contract documents. It is no less prudent now, however, for the parties to remain aware of their contractual rights and responsibilities—especially those tied to payment.  One payment term commonly contained in subcontract agreements is the contingent payment provision, which, depending on its terms, may pose an interesting challenge to construction lien rights.

Contingent payment provisions (e.g., “pay-if-paid” or “pay-when-paid” clauses) are frequently inserted in subcontract agreements. The hallmark of pay-if-paid clauses is usually “condition precedent” language, where the general contractor and subcontractor expressly agree that the general contractor’s receipt of payment from the owner is a condition precedent to payment by the general contractor to the subcontractor.  Under this clause, the subcontractor assumes the risk of non-payment by the owner.  On the other hand, pay-when-paid clauses have been interpreted to delay the subcontractor’s entitlement to payment until the owner pays, or for some reasonable time if the owner does not pay.

In a recent Oregon Court of Appeals decision, the court likely eased the burden for contractors seeking a defense under insurance policies in which they have been named as an additional insured. In my latest article for the Daily Journal of Commerce, I examine the decision, which expands upon a 2016 Oregon Supreme Court…

Contract claims and negligence claims are subject to different statutes of limitations, and if you are a participant in a construction project and believe you have been injured by another, it is important to understand what claims you may have, what statute of limitations applies to those claims, and when the limitations period may run…

The ability to defer taxes through a 1031 Exchange can make or break a real estate transaction.  But federal tax law does not treat all real estate owners equally. Under IRC Section 1031(a)(2), real property held “primarily for sale” in the ordinary course of a trade or business is excluded from Section 1031 and may be subject to ordinary income taxes in the event of a sale.

Generally, land held for investment purposes can be swapped for “like kind” property without triggering taxable gain. However, certain property is excluded from 1031 because, under IRC Section 1221(a)(1), it is not a capital asset, including:

(i)   Stock in trade of the taxpayer
(ii)  Inventory; or
(iii) Property held by the taxpayer primarily for sale to customers in the ordinary course of a trade or business.

Such property, including any real estate which qualifies as inventory, is excluded from 1031 treatment and, upon sale, is taxed at ordinary income rates. This means that active developers dealing in subdivided property for sale in the ordinary course of business may be excluded from capital gains tax treatment.

In the recently issued but unpublished decision Reed v. SunRun, Inc. (Los Angeles County Super. Ct. No. BC498002, Feb. 2, 2018), the Second District Court of Appeal ruled that a solar power purchase agreement (“PPA”) provider that only sells solar energy to homeowners is not required to be a licensed California contractor under certain…