In their focus on starting a construction project, developers, designers, and contractors can fall prey to unintended consequences arising from their deferral to and use of an “industry standard” contract form—as opposed to taking the time to precisely tailor the contract to the project’s needs and risks. In my latest article for the Daily Journal
Can a Contractor Simply Walk Off a Job?
Originally published as an Op-Ed by the Oregon Daily Journal of Commerce on October 20, 2022.
“It depends”—two words clients hate to hear from their lawyers. “It depends” is (regretfully) also the answer to the question posed in the headline: “Can a contractor simply walk off a job?”
While this topic is often covered by
The Importance of Third-party Beneficiary Clauses in Contracts
For anyone building a dream vacation home, renovating an existing commercial structure, or developing a multimillion-dollar, mixed-use project, construction contract terms are of utmost importance. One often overlooked clause covers the contractual “third-party beneficiary” (TBP)—a person or entity who, though not a party to the contract, stands to benefit from the contract’s performance. Interpretations of
Surety Bonds vs. Subcontractor Default Insurance
If a contractor cannot meet deadlines on a construction project or a subcontractor pulls out of a new project bid in order to pursue a more attractive opportunity, the project owner and/or prime contractor face potentially significant damages, which can include corrective work, costs of completion or substitute performance, and delay. In my latest column
Ensuring Your Construction Project Remains Insured
In too many cases, the developers, builders and designers of a construction project focus on starting work and pay inadequate attention to making sure important details of their insurance coverage are fully in place. Coverage denials can result from deferring to “standard” insurance forms, relying on informal broker assurances and not taking the time to
Tips for Owners and Contractors with Projects in the “Grey Area” of California’s COVID-19 Orders
In response to COVID-19, construction projects in California are currently subject to a statewide Executive Order and potentially other similar (or dissimilar) “stay home” or “shelter in place” orders or directives issued by counties and cities. Under the California statewide order, only businesses needed to maintain continuity of operations of identified federal critical infrastructure sectors (click here for the list) may continue to operate. Construction is not identified as a separate “critical infrastructure sector,” but many construction projects fall under the umbrellas of other sectors, such as “critical manufacturing,” “energy,” “healthcare,” and “commercial facilities.” The California State Public Health Officer also designated the following “essential workforce” members of relevance to the construction industry (this is not an exhaustive list):
- “Construction Workers who support the construction, operation, inspection, and maintenance of construction sites and construction projects (including housing construction)”
- “Workers such as plumbers, electricians, exterminators, and other service providers who provide services that are necessary to maintaining the safety, sanitation, construction material sources, and essential operation of construction sites and construction projects (including those that support such projects to ensure the availability of needed facilities, transportation, energy and communications; and support to ensure the effective removal, storage, and disposal of solid waste and hazardous waste)”
One challenge somewhat unique to owners and contractors is that the applicable orders are generally directed at identifying “essential businesses” or “critical businesses,” while owners and contractors may have a mix of projects—with some likely essential (such as construction of a hospital), others likely not (such as construction of a nightclub), and many falling in a grey area in between. When analyzing “grey area” projects it is recommended to focus on the traits of the particular project rather than attempt to understand whether your business—which may include a range of projects—can generally continue to operate.
Be Aware (or Beware!) of Extended Mechanic’s Lien Rights
Oregon law requires a lien claimant to perfect its lien by recording it within 75 days of ceasing to “provide labor, rent equipment, or furnish materials or 75 days after completion of construction, whichever is earlier.” An unpaid contractor must record its lien 75 days after completion of its major contract work and removal of
When “Art” Strikes Development
A 2018 legal case in New York arose over the disposition of a collection of run-down warehouses in Long Island City, Queens, New York, which graffiti artists began to use as a canvas for their work after the buildings went undeveloped by the owner for many years. When the owner announced that he would demolish
When Three’s Company, and Not a Crowd
Negotiating construction contract language in 2017 can have important consequences years into the future. The obligations and rights arising from one often overlooked clause, that addressing contractual “third-party beneficiaries,” i.e. “a person or entity who, though not a party to the contract, stands to benefit from the contract’s performance,” can vary considerably from state to
Alter Ego: The $5MM personal danger of neglecting corporate formalities and utilizing substandard building materials
Many building developers utilize a single purpose entity limited liability company (an “LLC”) to purchase and develop property, such as an apartment complex, a subdivision, or a shopping center. Generally, an LLC’s debts, whether incurred or judicially imposed, belong only to the LLC, not to its members. However, an LLC’s individual member may be subject to personal liability under the doctrine of alter ego liability if (1) the individual and the LLC share a unity of interest and ownership such that the separate personalities of the two no longer exist, and (2) treating the debts as the LLC’s alone would impose an inequitable result that rewards the bad faith of the individual. A recent legal decision from Southern California highlights the dangers of disregarding an LLC’s corporate formalities during any construction project.