The SJC Rules on the Scope of Termination for Convenience Clauses
In a case decided May 2, 2018, the Massachusetts Supreme Judicial Court confirmed that broad termination for convenience clauses will be interpreted and enforced in accordance with the contract’s plain language and without grafting additional protections for contractors or subcontractors. The decision is notable to because it (1) highlights the importance of contractors and subcontractors carefully reviewing, and where feasible, negotiating narrower and more favorable termination provisions; (2) reaffirms that Massachusetts’ courts interpret each contract based only on its plain meaning; and as it pertains to litigation,(3) states that the implied covenant of good faith and fair dealing cannot be breached when the parties follow the clear terms of their contract despite actual harm caused.
Will Massachusetts Courts Enforce an Agreement Requiring Indemnification for a Party’s Own Gross Negligence?
The United States District Court for the District of Massachusetts faced that question in 2010 and again in the Fall of last year. Both times the Court answered – No.
“Partial” Lien Waivers – Are They As Harmless As They Seem?
To obtain periodic payment due under a contract, contractors and subcontractors are frequently required to sign “partial” waiver of lien forms. There is nothing wrong with providing a partial waiver protecting the owner or contractor against liens for work on which payment is made. The difficulty is that many forms titled “partial” waiver of lien go far beyond what the title suggests. The fine print often includes a general release of claims, whether paid or not; and often requires the signer to indemnify the owner and/or contractor against claims of sub-subcontractors or suppliers, whether or not payment is included to cover those claims. A contractor or subcontractor, who blindly signs such forms to obtain periodic payments, may discover, at the end of the project, that it has surrendered important legal rights. Not only may the contractor or subcontractor have surrendered lien rights needed to insure collection of final payment, including retainage, it may have also released the right to recover for disputed items of extra work or the right to contest disputed back charges credited against the contract price. And to add insult to injury, it may have to defend and indemnify the owner and/or contractor against claims by its own subcontractors or suppliers for amounts which it has not been paid and which it inadvertently surrendered by signing the “partial” waiver of lien.
Avoiding The Impact Of a No-Damages-For-Delay Clause in Massachusetts
Construction projects fall behind schedule for many reasons. For instance: a hurricane may hit the site destroying the work in place; an owner may fail to respond promptly to critical RFIs bringing work to a standstill; or a general contractor may fail to coordinate the work causing logjams and inefficiencies for subcontractors. Although the cause of any given delay may be less than clear, one thing is almost always certain – schedule impacts have wide-ranging financial repercussions for everyone involved in the project. Subcontractors, however, are likely to feel the tangible effects of an impacted schedule first and most significantly, since they carry the initial burden of a paying for most of the labor and material costs. Subcontractors may be forced to accelerate their work in a compressed schedule, working nights and weekends. They may lose productivity if the contractor stacks the sub-trades. Delays and the slippage of the construction schedule may result in escalation of wages and material costs. If your project schedule has been impacted for reasons unrelated to you and your costs are spiraling out of control, first read your subcontract and then understand Massachusetts’ law.
Arbitration and You
While all litigation is costly, arbitration offers the prospect of a quicker and less expensive method of dispute resolution. It is often quicker because (1) there are fewer opportunities for discovery and pretrial maneuvering which often bogs down court actions in a series of endless legal skirmishes (2) it is easier to get before a panel of arbitrators than a judge and jury and (3) there is less likelihood of an appeal. Arbitration may also be cheaper because less legal time is wasted on inconclusive pretrial maneuvers and on post trial appeals. However, the savings in legal fees may be offset at least in part by arbitration costs such as arbitrator fees and administrative costs which can be expensive depending on the number of hearings and the size of the claims. But arbitration is not a matter of right as is the initiation of a court action. Instead, it is a matter of agreement. Arbitration of disputes is not available unless the parties agree to submit their disputes to arbitration. There are essentially two forms of agreement. The first is where the contract contains an explicit arbitration provision. The second is where the contract contains no arbitration provision but it incorporates other documents by reference, such as general conditions, which include an agreement to arbitrate. By court decision, an arbitration agreement incorporated by reference is just as binding as one stated in the contract.
Tips For Reducing Your Litigation Costs
Litigation costs are an important element in pursuing or defending any construction claim. There are ways in which you can help control and even reduce those costs.
Massachusetts’ Prompt Pay Act – A Refresher
The Prompt Pay Act has improved the flow of funds to those who furnish and pay for the labor and materials in private construction. It contains important provisions affecting progress payments, change orders, “pay-if paid”, disputes, and suspension of work.
Payment Security When You’ve Lost Your Lien and Bond Rights in Massachusetts
The best kind of security for work performed on public jobs is a payment bond, which allows for recovery of labor and material costs and attorney’s fees. On private jobs, claimants have lien rights, and may also have the added security of a bond. The technical procedures for preserving one’s rights to these types of security vary, and it’s possible to lose the benefit of these protections if you do not strictly comply with the requirements for each.
Construction Litigation Tips – Visual Records
Every construction project is an unfolding story always developing, always changing until the final result is achieved. Construction disputes form obscure parts of that story. If those disputes reach court they must be recreated in the context in which they arose, generally through testimony. Because of the complexity of events, the passage of time and the unreliability of most people’s memories, testimony is not always accurate. Inaccuracy opens the possibility of judicial decisions based on an incomplete or inaccurate portrayal.
Ambiguous Specification Requirements – Who Pays?
Too often disputes arise on construction projects because plans and specifications are poorly expressed or are in conflict. The result is that someone is required to perform work that was not carried in the bid price. The dispute over who pays for that work generally turns on just how obvious the ambiguity was.
Corwin & Corwin Places Most Construction Attorneys of Any Firm in Boston’s Top Rated Lawyers
Corwin & Corwin Attorneys Selected as Superlawyers
Corwin & Corwin Attorneys, Chares Ahern and David Wilson, were recently selected as New England “Superlawyers” by Thomson Reuters and the publishers of Boston Magazine for their excellence in Construction Litigation. Charlie and David were selected to this elite group of attorneys from hundreds of construction lawyers in New England. Selection as a “Superlawyer” is based upon peer reviews and recommendations as well as an independent evaluation of each attorney in their respective practice area. Attorney, Emanuel Bardanis, was selected by the same publication as a “Rising Star” in the area of Construction and Surety Law. The “Rising Star” distinction is given to exceptional attorneys under the age of 40.
THE NEW MASSACHUSETTS RETAINAGE LAW
Norfolk Electric, Inc., & others vs. Fall River Housing Authority, 417 Mass. 207
03/07/1994 Posted By: Corwin & Corwin LLP
Builder’s Risk – Who Needs It?
While most participants in the construction process are familiar with Liability Insurance and Workman’s Compensation Insurance, fewer understand Builder’s Risk Insurance. As a result, this essential coverage is often overlooked by those who need it most. Any construction project in progress is exposed to the risk of property damage from fire, wind, flood, collapse, theft, vandalism and other unexpected perils. As a general rule, contractors, subcontractors and suppliers are responsible for their work and materials until they complete performance. That means they must replace what is damaged or lost. Consequently, they bear a great risk of loss should damage occur before completion. So does the owner who may have already paid for the work damaged. Builder’s Risk Insurance, often referred to as “All Risk Property Insurance”, is the form of property insurance designed to protect everybody against this loss by shifting the risk to an insurer.
Construction Litigation Tips – Daily Job Records
In an industry where disputes are frequently not resolved for months or years, and often through litigation, the importance of accurate record-keeping cannot be overstated. Construction disputes involving delays and extra work claims often become “swearing contests”, pitting one person’s word against another’s. Recollections are subjective. They change or dissolve entirely over time. The best weapon you have against changing stories and faulty memories is an accurate and objective portrayal of day-to-day project conditions.
Construction Litigation Tips – Letters
Letters in the construction world serve two purposes. The first purpose is to convey information to someone else. The second is to establish a record for future reference. What you did or said to someone last month, last year or three years ago is much easier to remember when you have a letter confirming it. While many lawyers will object to the admissibility of a letter because it is “self-serving”, the objection is seldom sustained. In arbitration, a knowledgeable lawyer won’t even bother to object. A famous judge once suggested it is rare that a letter is not meant to serve one’s interest. Some people consider letters a bother. In an earlier generation, when contracts were made with the shake of a hand, confirming letters may not have been necessary. But in today’s competitive high-tech world, with six inch specification books and dozens of plans, relying exclusively on the spoken word is a mistake.
Construction Litigation Tips – Signed Slips
Extra work claims start as a dispute over the scope of work, but too often degenerate into a prolonged and unnecessary fight over damages.
Contract Notice Provisions – Beware
A typical construction scenario occurs when a contractor or subcontractor is ordered to perform work that the contractor or subcontractor believes to be beyond its contractual scope. The contractor or subcontractor performs the work, keeps records of the additional costs and, after the work is completed, submits a claim. The claim is denied. Litigation commences and during trial a judge determines that the work was beyond the scope of the contract or subcontract, and the amount claimed was the fair value of that extra work. Therefore, the contractor or subcontractor would conclude that it would absolutely win the claim. WRONG! Why?
Joint Checks – Advantages & Dangers
With increasing frequency sub-subs, including suppliers, are requesting payment by joint check from the prime contractor. Many are unwilling to work for certain subcontractors without such an arrangement, particularly on unbonded projects. Joint checks are a form of payment security because they greatly diminish the opportunity for an economically desperate subcontractor to divert payment made on account of a sub-subs work. They also benefit the prime contractor because they provide a means of insuring payment to sub-subs or suppliers and thus avoid work stoppages and potential lien or bond claims.
Lien Waivers – Too High a Price for Payment?
To obtain periodic or final payment due under a contract, contractors and subcontractors are frequently required to sign so called “waiver of lien” forms. There is nothing wrong with providing a waiver protecting the owner or contractor against liens for work on which payment is made. The difficulty is that many forms titled waiver of lien go far beyond what the title suggests. The fine print often includes a general release of claims, whether paid or not; and often requires the signer to indemnify the owner or contractor against claims of sub-subs or suppliers, whether or not payment is included to cover those claims. A contractor or subcontractor, who blindly signs such forms to obtain periodic payments, may discover, at the end of the project, that it has surrendered important legal rights. Not only may the contractor or subcontractor have surrendered lien rights needed to insure collection of final payment, it may have also released the right to recover for disputed items of extra work or the right to contest disputed back charges credited against the contract price. And to add insult to injury, it may have to defend and indemnify the owner or contractor against claims by its own subs or suppliers for amounts which it has not been paid and which it inadvertently surrendered by signing the “waiver of lien”.
Liquidated Damages – Not Penalty Damages
Liquidated damages are nothing more than damages agreed to in advance as compensation for a potential future breach of contract. In construction contracts, liquidated damages are normally assessed for late completion and are stated as a per diem rate. The total liquidated damages to be assessed in the event of unexcused late completion are computed by multiplying the number of days performance goes beyond the required completion date by the per diem liquidated damage rate.
Mediation and You
In recent years, the construction industry has sought alternative forms of dispute resolution to avoid the high cost and wasted effort inherent in hotly contested litigation. One of these alternatives is mediation. At bottom, mediation is a settlement negotiation conducted through a neutral third party mediator. Mediation can be voluntary or required by the contract, or in some instances may be required by the Court in which the dispute is pending. The American Arbitration Association offers voluntary mediation in conjunction with a pending arbitration. Whether voluntary or required, mediation is always non-binding and any party can end the process at any stage of the mediation by refusing to budge. Statements made during the course of the mediation cannot be used in court or arbitration proceedings.
Unfair or Deceptive Business Practices
A means to get even with the unethical Massachusetts is among the leaders in encouraging fair business dealings by making unfair dealings risky and expensive. General Laws c.93A, §§2 and 11 injects morality into the market place by making unfair or deceptive practices unlawful, and by penalizing severely those who injure others by such methods. Those penalties may include double or triple the actual damages inflicted, plus the victim’s legal fees and expenses. G.L. c.93A does not define unfair or deceptive acts subject to penalty, but courts usually describe it as unethical conduct beyond the ordinary. That means a run of the mill breach of contract, such as failure to pay on time, would probably not qualify as an unfair or deceptive act. But a breach of contract coupled with some ulterior motive might well qualify. For example an owner’s refusal to pay an undisputed balance unless the contractor accepted some disputed back-charge, or gave up part of its balance or conferred some other undeserved advantage on the owner would probably violate c.93A. A Mass. Appeals Court described the type of breach qualifying for c.93A penalties as where “the breach of contract has an extortionate quality that gives it the rancid flavor of unfairness”.
When Performance Becomes Impossible or Unfeasible – Who Bears the Risk?
Whether performance is excused depends on the event that makes performance impossible or unfeasible, and whether that event was contemplated under the contract. If the event was so unusual and unexpected that the parties could not reasonably have foreseen it, and if it is unfair to place the risk of its happening on either party, then the Court may excuse further performance of the contract on both sides. On the other hand, if the risk that such an event could happen was one that the parties should reasonably have anticipated, or if the contract assigned that risk to one of the parties, then the Court normally would not excuse further performance. Known risks assigned by contract will not excuse performance no matter how disastrous the consequence of that risk.
Shop Drawings and Materials Submittals
Shop drawings and material submittals (submittals) are a critical element of every construction project. They serve to provide the architect, contractor and subcontractors with detailed information on the materials to be incorporated into the project. They are essential to assure compatibility, to allow the general contractor and architect to coordinate the installation of materials furnished by various trades and to identify materials which may have a long lead time that could impact the proposed schedule for the project.
Material Suppliers – Bond Insecurity
Of all participants in the public projects, material suppliers have the least payment security. That is so because the public bond statute (M.G.L c.149, §29) creates a distinction among suppliers based on who they supply materials to. Those who provide materials to the general contractor or to a subcontractor have bond coverage. Those who provide materials to another material supplier do not have bond coverage.
Attorney John M. Curran recently conducted a seminar for the Associated Subcontractors of Massachusetts entitled: The Money is Due: Now How to Collect?
The seminar focused on security options for payment on construction projects. The agenda included: bond claims, lien rights, bank account and real estate attachments and reach and apply actions. Co
Attorney John Curran recently led a seminar for the Boston Bar Association concerning the legal ramifications of the SJC’s Trace Construction case.
In April 2011 the Massachusetts Supreme Judicial Court decided the matter of Trace Construction et al v. Dana Barros Sports Complex et al.. John Curran, trial and appellate counsel for subcontractor, L.C. Anderson, recently conducted a seminar for the Boston Bar Association to discuss the impact of the Court’s decision on landlords, tenants, general contractors and subcontractors. A copy of the Court’s decision can be found at the Massachusetts Social Law Library website: http://www.socialaw.com/slip.htm?cid=20588&sid=120 .
Attorney David Wilson Set to Ride in his 14th Pan Massachusetts Challenge
On August 4 and 5, David Wilson will be participating in the Pan-Mass Challenge — a nearly 200-mile bike ride from Sturbridge to Provincetown to raise money for life-saving cancer care and research at Dana-Faber Cancer Institute through the Jimmy Fund. This will be David’s 14th year riding, and during this time he has raised almost $90,000. If you would like to support David, just go to www.pmc.org and make an e-gift using David’s ID of DW0043.
Attorney David Wilson leads Boston Bar Association seminar for newly admitted lawyers.
Corwin & Corwin LLP attorney David Wilson recently conducted a seminar for the Boston Bar Association entitled “Mistakes New Lawyers Make.” David has been giving this seminar to newly admitted lawyers since 2006. This seminar focuses on the practical pitfalls experienced by many new attorneys and ways to avoid these traps for the unwary.
Is a subcontract provision waiving all statutory payment bond rights against a general contractor and its surety on a Massachusetts public construction project enforceable?
Massachusetts law generally permits parties the freedom to enter into contracts as they see fit. Courts will usually enforce the provisions of an agreement unless its terms are illegal or against public policy. In the case of Costa v. Brait Builders Corporation and Arch Insurance Company (SJC-11011) (decided August 1, 2012) the Massachusetts Supreme Judicial Court (SJC) had to determine if a subcontract provision in which the subcontractor agreed to waive its statutory rights of recovery on the general contractor’s public payment bond was enforceable. The Court answered the question clearly deciding that such a waiver was not enforceable.
Corwin & Corwin is moving!
On June 10, 2013, Corwin & Corwin LLP is moving to 600 Unicorn Park, Woburn, MA 01801. Our new location, a minute off of I-93, will better serve visiting clients with convenient parking and permit our attorneys quick access to Middlesex Superior Court, one of the busiest courts in the commonwealth. Our phone and fax numbers and email addresses will remain the same.
SUBMITTING PUBLIC BIDS IN MASSACHUSETTS: LITTLE THINGS CAN MEAN A LOT
In preparing and submitting bids for public construction, it is important to comply with all of the Instructions to Bidders. This was highlighted in a recent decision by the Attorney General’s Bid Unit.
Corwin Attorney Authors Article on Payment Bonds
Attorney authors Little Miller Acts; Know Your Rights Before Crossing the Boarder for the 2013 Summer/Fall publication of The Professional Contractor. This article addresses payment bond rights on public projects in Massachusetts and neighboring states. This article includes a helpful chart with deadlines and requirements to preserve rights for subcontractors and suppliers who are performing work in other states. A copy of this article can be found here: http://issuu.com/thewarrengroup/docs/tpc_summerfall2013
Flow Down Clauses – Their Purpose and Effect
Clauses in a subcontract which incorporate the general contract by reference, and which bind the subcontractor to the general contractor to the same extent the general contractor is bound to the owner, are referred to as “flow down” clauses. Their use is widespread, and they are found in most subcontract forms. Despite harmless sounding language, flow down clauses constitute one of the most powerful provisions in a subcontract.
When Your Insurer Reserves the Right to Disclaim Coverage
When a contractor is sued for negligence, it must immediately notify its general liability insurer. That insurance includes two distinct coverages. The first is the right to have the insurer provide the legal defense. The second is the right to indemnification from the insurer up to the policy limit if liability is established. Both coverages are triggered by prompt notice of claim.
- The SJC Rules on the Scope of Termination for Convenience Clauses
- Will Massachusetts Courts Enforce an Agreement Requiring Indemnification for a Party’s Own Gross Negligence?
- “Partial” Lien Waivers – Are They As Harmless As They Seem?
- Avoiding The Impact Of a No-Damages-For-Delay Clause in Massachusetts
- Arbitration and You
- Tips For Reducing Your Litigation Costs
- Massachusetts’ Prompt Pay Act – A Refresher
- Payment Security When You’ve Lost Your Lien and Bond Rights in MA
- Construction Litigation Tips – Visual Records
- Ambiguous Specification Requirements – Who Pays?
- Corwin & Corwin Places Most Construction Attorneys of Any Firm in Boston’s Top Rated Lawyers
- Corwin & Corwin Attorneys Selected as Superlawyers
- THE NEW MASSACHUSETTS RETAINAGE LAW
- Norfolk Electric, Inc., & others vs. Fall River Housing Authority, 417 Mass. 207
- Builder’s Risk – Who Needs It?
- Construction Litigation Tips – Daily Job Records
- Construction Litigation Tips – Letters
- Construction Litigation Tips – Signed Slips
- Contract Notice Provisions – Beware
- Joint Checks – Advantages & Dangers
- Lien Waivers – Too High a Price for Payment?
- Liquidated Damages – Not Penalty Damages
- Mediation and You
- Unfair or Deceptive Business Practices
- When Performance Becomes Impossible or Unfeasible – Who Bears the Risk?
- Shop Drawings and Materials Submittals
- Material Suppliers – Bond Insecurity
- Attorney John Curran recently led a seminar for the Boston Bar Association concerning the legal ramifications of the SJC’s Trace Construction case.
- Attorney David Wilson Set to Ride in his 14th Pan Massachusetts Challenge
- Attorney David Wilson leads Boston Bar Association seminar for newly admitted lawyers.
- Is a subcontract provision waiving all statutory payment bond rights against a general contractor and its surety on a Massachusetts public construction project enforceable?
- Corwin & Corwin is moving!
- SUBMITTING PUBLIC BIDS IN MASSACHUSETTS: LITTLE THINGS CAN MEAN A LOT
- Corwin Attorney Authors Article on Payment Bonds
- Flow Down Clauses – Their Purpose and Effect
- When Your Insurer Reserves the Right to Disclaim Coverage