Best Practices Construction Law : Construction Lawyer & Attorney : Matthew DeVries : Smith Cashion & Orr Law Firm : Green Building & LEED Litigation

"Pay me less before the dispute erupts ... or pay me more after the dispute erupts ..." is a phrase that many construction litigators have said to their clients.  What that means, practically, is that if you invest the time and money to have your attorney review construction contracts before the job starts, you will save time, money and effort later when the dispute begins (and perhaps you may even fend it off). Despite the warnings, there are many out there who want to "go it alone" ... and that's okay.  This post is for you.

The American Bar Journal posted an article two weeks ago about a federal bankruptcy judge who was fed up with "superfluous words and too much capitalization."   The judge took a stand against legalese and issued some guidelines (pdf) to the practicing bankruptcy attorney.  Some of my favorites include:

• Lawyers apparently disfavor articles, both definite and indefinite. Use the
  articles “the,” “a,” and “an” as appropriate. Write the way you would speak.
• Never use and/or.
• Eliminate superfluous words. They serve no purpose other than to make the
  document sound more legal ... Examples of such words are: “hereby,” “herein,”
  “in and for,” “subject,” “that certain,” “now,” “that,” “undersigned,”
  “immediately,” “heretofore entered in this case,” “be, and hereby is”–the list
  goes on and on.
• Keep plurals and possessives straight and consistent. Know when to use
  debtors (plural), debtor’s (singular possessive), and debtors’ (plural
  possessive). Make sure the verb matches the subject of the sentence.

You can tell by the terse language in the judge's guidelines that he likes clarity and he wants litigants (and particularly their attorneys) to follow those guidelines.  If I were a construction litigator ... which I am ... I wonder what my suggested guidelines would be for construction contracts.  Here are a few:

• Keep the names consistent.  I know this will take some searching and replacing in your form contracts, but it is important to track the parties' names correctly.  Many times, I have found a "subcontractor" listed as "contractor" in one section and "subcontractor" in another section.
• Identify the "contract documents" for the parties.  Too many disputes arise because someone thinks the proposal or purchase order is part of the parties' agreement only to learn later that it has not been incorporated as part of the contract documents.  Many form contracts have an "order of precedence" clause that ranks the precedential value of the documents in the event of a dispute.  Make sure to expressly include every document that you want into the contract documents.
• Evaluate and clarify the "dispute" provisions.  Again, I have seen a number of lawsuits between parties spend too much time on the procedural issues such as litigation, arbitration, mediation (because the contract was not clearly written), rather than getting to the heart of the matter.  Make sure your contracts clearly identify your method of dispute resolution.

Do you have any other guidelines for your construction contracts?

Photo: Flckr - LucasTheExperience

• Email This
• Print
• Comments
• Trackbacks

I have my Google reader set to search various blogs, news sites, and Twitter feeds to help me keep current with the latest trends in the construction industry.  There remains one major problem: the words we use have different meanings for everyone.  

Take, for example, my search of Twitter feeds (above) for Building Information Modeling (BIM).  If you were to do the same search during a weekday morning, the majority of results would return various individuals involved in some aspect of the construction industry either praising or criticizing BIM. Now, if you were to do the same search on any given Friday or Saturday night, you might be surprised to get a varied assortment of results (and photographs) of individuals out for a night of partying.  You see, BIM is also slang for "bimbo" or ... how do I say this ... a "lady with questionable morals"? 

What's the lesson here?  Did you click on this article because you thought it related to LEED or Green Buildings?  It kinda does.  It kinda doesn't.  The lesson is that we live and work in a world where information spreads quickly.  In addition, we have become informal in our communications through the use of email, texting and Twitter.  (And in our personal lives, there may not be anything wrong with informality in our communications.)

However, the construction project is built on expectations and performance.  Where those expectations are accurately and correctly reduced to a writing, the parties have a written contract.  Where the parties use words that have different meanings (and both interpretations are reasonable), we now have an ambiguity.  A judge or arbitrator will then be asked to interpret that ambiguity based upon any number of legal tools (i.e., parties' words and conduct, other writings outside the four cornings of the contract, industry norms, etc.).  As the construction industry begins to employ new technologies, such as BIM, or new performance based goals, such as energy performance from a LEED certified building, then it becomes even more important that we use words that do not lead to miscommunication.

• Email This
• Print
• Comments
• Trackbacks

The "before" picture often magnifies the significance of the "after" picture.  In other words, if you had only seen the "after" picture below, then you may think, Wow! How did that crane find its way into that nice pool of water? Perhaps it somehow fell into the water?

Now check out the "before" pictures ... which tell you exactly what happened.

Did you know photographs like the ones above are essential to the construction project management process?  The term project management includes: (1) establishing procedures to manage, monitor and document work and progress; (2) ensuring regular flow of information for project control and coordination; and (3) creating contemporaneous, accurate and complete record of job conditions and problems including their impact to the project.

But why are proper records so essential for claims and disputes?

• To establish causal connection between the event and the damages
• To establish reservation of rights or non-waiver of your claim
• To properly identify actual costs and delays incurred

As a construction litigator, most of the claims that I handle involve breach of contract disputes.  The majority of them involved one of the above three issues, which must be established by some type of proof (i.e., testimony or letter or written change order or photograph).  Good record keeping will either prevent claims or preserve your rights. 

• Email This
• Print
• Comments (1)
• Trackbacks

When my kids break something in the house, they immediately begin pointing the finger at the "alleged" responsible actor.  In the construction world, many times you will need to fix the problem first and then point the finger later. 

I read an article today by Jack Broom in the Seattle Times that illustrates this point.  The incident involved two massive tunneling machines that were damaged and awaiting costly repairs ... 300 feet below ground!  The 17.5 foot diameter machines are supposed to be boring a 13-mile tunnel to take waste water to Puget Sound.  Rather than the five-feet-per-hour pace that these machines should be boring through compacted wet dirt, they are dead stopped awaiting repairs.  According to the article, more than 120 workers have been laid off until the machines are fixed and each day of delay adds to the owner's more than $1.8 billion in escalating costs.  It may take another month or two before the machines can be fixed and start boring again.

This story represents what should be happening on the construction project gone wild scenario: 

For now, [according to the owner's project manager], the county, the contractor and the machines' manufacturer are working together on "getting the fix in place and getting these tunnel-boring machines moving again ... It's in everybody's interest to complete this job as quickly as possible."

Although the parties are reportedly working to find a common solution to repair the two machines so that the contractor can complete the work, legal responsibility for the delays will need to be determined.  Including the legal questions highlighted in Broom's article, a court may be asked to resolve the following:

• Were there any subsurface reports performed prior to the start of the work?
• Did the owner have any contractual responsibility for subsurface conditions?
• Did the contractor have any contractual responsibility for its own inspection of subsurface conditions?
• Did the owner/architect have any ongoing supervisory or inspection duties during performance of the work?
• Were the machines properly mobilized and operated during construction?
• Were the machines defective in any way?
• Were there any other concurrent delays affecting the work?

For owners/developers, this incident is an example of how unexpected events on a construction project require a multi-phased approach to the problem.  Your situation may dictate that you quickly assess the extent of the damage, determine a workable and cost effective solution and fix the problem first ... and leave leave the finger-pointing to later.  So long as you reserve your rights in accordance with the notice provisions of your contract, the project completion will be better served in this approach.

Contractors should take heed that when your work is delayed for reasons beyond your reasonable control, there may be contractual and legal defenses to an owner's assessment of liquidated damages.  Of course, the immediate goal will be to get the project back on schedule ... but remember the finger may be pointed at you sometime down the road.

• Email This
• Print
• Comments (3)
• Trackbacks

I realize that the title to this post may scrunch some “What you talkin’ about, Willis?” eyebrows to the many LEED AP-construction-green-building-attorneys out there. However, the title really conveys the first words that ran through my mind as I read Gary Cole’s post on The Real Green Goblin – Emerging Legal Liability for Green Design Professionals and Contractors on his blog LAW/ARK.

I must admit that I jumped to various conclusions prior to reading Cole’s entire post. Instead, I focused on the following statements:

The bad news is that attorneys, especially those already practicing in construction law, will soon realize that aside from green design and construction’s sometimes specialized and occasionally ill-defined vernacular, there’s no real novelty in the types of claims that might arise.

No new frontiers of jurisprudence need be explored–a leaky green roof is still a leaky roof–whether it also requires regular mowing and landscape maintenance changes little from a legal perspective.

As I continued reading the post, however, I realized that Cole was marching in the right direction, particularly with the following statement: “In non-legal terms, most legal liability associated with green design and construction will arise from one issue–though it’s an issue with many faces–unfulfilled expectations.” Cole even makes a call out to the “fellow attorneys” reading the post with a disclaimer that this is an oversimplified analysis of the legal claims available.

When discussing green building claims, perhaps the best point made by Cole is understanding the balance between a project’s “green marketing claims” (or its “form”) and its “real performance (or its “substance”). I view that so-called "balance" at the heart of the issue. While it can be said that green building disputes will arise primarily from parties’ unfulfilled expectations–as do most commercial contract disputes–the form and substance will be an inherent part of any claim, whether pursued in contract, tort or otherwise.

Cole may be right that there is no novelty to the traditional types of claims (contract, tort, statutory, etc.) that may arise in green construction disputes. However, the novelty in the green building industry is the new set of standards that will inevitably become part of the legal dispute. In other words, while “a leaky green roof is still a leaky roof” … there will be new risks to be allocated, different types of damages lost, additional players involved, varied proof required and, yes, perhaps a novel cause of action alleged because that leaky green roof system failed.  Given the relatively uncharted territory, I cannot say that "green building for attorneys is merely hoopla" ( ... my words ... not Cole's ...)

• Email This
• Print
• Comments
• Trackbacks

You don’t always say what you mean. And you don’t always mean what you say. 

In construction contracts, parties attempt to use plain and ordinary words to describe their respective obligations. For example, when the parties use the word “shall” in their agreement, they generally understand that the obligation specified is mandatory. Or when parties use the word “may” in their contract, performance is permissive or optional given the plain meaning of the word. Consider the following construction contract provisions:

“If the Owner fails to make payment for a period of 30 days, the Contractor may, after seven days written notice, terminate the Contract and recover from the Owner payment for Work performed.”

“The Work may be suspended by the Owner as provided in Article 14 of the General Conditions.”

“Payments may be withheld on account of (1) defective Work not remedied, (2) claims filed by third parties, or (3) failure to carry out the Work in accordance with the Contract Documents.”

In all of theses examples, it seems clear that the parties agreed to allow—but not require—the specified performance. The word “may” was permissive in nature.

According to some courts, however, this traditional line of reasoning is no longer the trend in the context of arbitration provision in construction contracts. For example, in TM Delmarva Power v. NCP of Virginia, the Supreme Court of Virginia held that the parties’ use of the word “may” in the dispute resolution provisions of their construction contract required mandatory participation in arbitration at the election of one of the parties. The arbitration agreement provided:

“If any material dispute, disagreement or controversy concerning this Agreement is not settled in accordance with the procedures set for in [previous section] . . . then either Party may commence arbitration hereunder by delivering to the other Party a notice of arbitration.”

The court held that the above provision was mandatory at the election of one of the parties: “The word ‘may’ . . . means that either party may invoke the dispute resolution procedures, but neither party is compelled to invoke the procedures. . . . [But] once a party invokes the arbitration provision, the other party is bound to arbitrate.”  The Delmarva court reasoned that the disputes provision would be “rendered meaningless” if the word "may" was interpreted as permissive because parties to a commercial contract can always choose to submit their disputes to arbitration.  The Fourth Circuit reached the same dcision in United States v. Bankers Ins. Co.

Given the trend that the courts have interpreted the term “may” as “shall” in the context of arbitration agreements, parties to a construction contract must be careful in understanding both the plain, ordinary meaning and the legal meaning of the particular words used. In the above examples, if the parties wanted arbitration of disputes to be permissive and non-mandatory, they could have clarified their contract by including more explicit language (i.e., "any and all disputes, upon mutual agreement, may be arbitrated" or "with the consent of the other party, either party may commence arbitration").  It is important in contract drafting that you say what you mean and you mean what you say.

• Email This
• Print
• Comments
• Trackbacks