Authored by: Darren Rowles and Scott Cahalan Contractors on public and private projects are often required to obtain surety bonds to secure their bidding, payment, and performance obligations under a construction contract.[1] A bond is a three-party contract entered into by the surety, the principal (contractor) and the obligee (owner) in which the surety guarantees to the obligee that the principal will perform certain obligations under the contract between the obligee and the principal. For example, a surety on a performance bond guarantees the owner that the contractor will complete the project; and a surety on a payment bond guarantees the owner… Read more
Author: construction
Material Breach and the Consequences of Being Wrong
Authored by: Scott Cahalan and Darren Rowles It’s not uncommon for parties to a construction contract to exchange heated letters accusing each other of material breach of their contract. Determining whether a breach occurred is easy compared to determining whether that breach was material. A breach is a failure to perform an express or implied obligation under a contract. Whether that breach is material turns on the facts and circumstance surrounding the formation of the contract and is often a matter of degree. For instance, a seller would breach a contract to sell a 1964 metallic mint green Buick Skylark… Read more
Local Government Procurement Laws – What does it take to be a “Responsive Bidder”?
Authored by: Darren Rowles and Scott Cahalan In a previous article we discussed the requirement that, if it awards a public works contract, a public entity in the State of Georgia must award the contract to the “lowest responsible and responsive bidder,” unless an exception to this requirement applies. This article addresses what it means to be a “responsive bidder.” While responsibleness focuses on the bidder or proposer, responsiveness focuses on the bid or proposal. Specifically, responsiveness requires that a bid or proposal respond and conform to the requirements of the invitation for bids or request for proposals (the “Bid… Read more
Are Sole Source Specifications Enforceable?
Authored by: Darren Rowles and Scott Cahalan A sole source specification restricts a bidder to providing materials, equipment, or labor, from one source. For example, a specification that requires the contractor to furnish a 1200 ton Trane CenTraVac® chiller would preclude furnishing any other make or model of chiller. Sole source requirements are enforceable on private projects where the parties are free to contract with whomever and for whatever they want, so long as their contract is lawful and does not violate public policy. But sole source requirements can conflict with the policy behind public procurement laws that require competitive… Read more
Local Government Procurement Laws – Who the Heck is a “Responsible Bidder”?
All state and local government public works construction projects must follow the public bidding and procurement laws, which seek to protect the public against the squandering of public funds and prevent abuses such as fraud, waste, and favoritism. Local governments[i] are required to provide public notice and to competitively award public works construction contracts,[ii] unless an exception applies, such as where the estimated cost of the project will be less than $100,000.[iii] A contractor forfeits its right to payment if it performs work knowing that the local government did not follow the public procurement laws. Local governments who take competitive… Read more
Force Majeure Events and Contract Clauses
Recent events have again demonstrated the fragility of the network of overseas suppliers for industries ranging from automobile manufacturers to big-box retailers. Supply disruptions can be caused by labor disputes at port facilities; by piracy, cyclones or other events that disrupt goods-in-transit; and by natural or man-made events such as earthquakes or armed conflicts that disrupt production or transportation in an overseas country. Unfortunately, the construction industry is not immune to disruptions in the supply of goods from foreign sources. Most construction contracts include a force majeure provision; however, not all such provisions are created equal. Some provisions do not… Read more
Will a Duty to Inspect the Site Adversely Affect a Differing Site Conditions Claim?
Last month, we discussed why utility contractors should insist on the inclusion of a differing site (changed) conditions (“DSC”) clause in their contracts. A DSC clause allocates to the owner the risk that actual physical conditions at the site are materially different from the expected physical conditions at the site, along with establishing a procedure for adjusting the contract price and time for DSCs. Absent a properly drafted DSC clause, the doctrine of sanctity of contract normally places the risk on the contractor if the work is more difficult, costly, or time-consuming than expected due to a DSC. DSCs fall… Read more
Differing Site Conditions: What Are They and Are You Protected?
You’ve contracted to install underground utilities. Once the work begins, you discover soils with inadequate bearing capacity, large amounts of unanticipated rock, groundwater at levels higher than anticipated, buried debris, or hazardous wastes. None of these conditions were expected. As a result, the cost you promised to the owner to install the utilities is no longer feasible. Who bears this risk? A “differing site condition” (also known as a “changed condition”), which is abbreviated in this article as a “DSC,” is an unknown and hidden, concealed, or latent physical condition encountered at a site that differs materially from the reasonably… Read more
CGL Policy Coverage for Rip and Tear Costs
General contractors are all too familiar with the limitations in a CGL policy relating to defective work. Those limitations exclude coverage for costs associated with damage caused by “your work.” There is a limited exception to the “your work” exclusion in some CGL policies that affords coverage for damage to other work caused by defective work performed by subcontractors (the “Subcontractor Exception”). Regardless, there is no coverage for the costs of correcting the defective work itself – only for damage to other work caused by the defective work. Water intrusion situations provide good examples of how this coverage works. A subcontractor’s… Read more
The Spearin Doctrine Cont’d: Some Important Nuances and Exceptions
Last month, we discussed the Spearin doctrine, which establishes that a project owner impliedly warrants that plans and design specifications will be adequate if the owner issues and the contractor complies with the plans and specifications.[1] As a result, a contractor can use the Spearin doctrine defensively to avoid the consequences of defective plans and specifications or offensively to bring a claim if the defective plans and specifications cause its work to be more expensive, timely, or difficult. The Spearin doctrine’s applicability and longevity have spawned a number of nuances and exceptions, some of which we discuss in this month’s… Read more