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Posts Tagged ‘construction’

Pennsylvania Orders Halt to Construction Projects Other than Emergency Repairs and the Construction of Health Care Facilities

Posted on: April 2nd, 2020

By: Sean Riley

Governor Tom Wolf has issued an executive order closing all businesses in Pennsylvania that are not deemed to be “life-sustaining.” Residential and non-residential building construction, as well as utility subsystem, road and bridge construction are all specifically listed as businesses that must immediately cease physical operations. However, “emergency repairs” and “construction of healthcare facilities” are permitted to continue. Businesses that are part of the supply chain or are otherwise necessary to support life-sustaining business may apply for a waiver but must do so on or before the April 3, 2020 deadline. Businesses should consult with legal counsel to determine whether such a waiver is appropriate.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on the construction industry, employment issues arising from the virus, the real-world impact of business restrictions, and education claims. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

City of Atlanta’s COVID-19 Shut-Down Order Impacts Certain Construction Projects

Posted on: March 24th, 2020

By: Jake Carroll

Executive Order Number 2020-21 (“Shut-Down Order”) was issued by Kiesha Lance Bottoms, the Mayor of Atlanta, on March 23, 2020 at 8:49PM. Atlanta’s Shut-Down Order is more restrictive than similar orders seen in Florida (with broader exceptions for construction) and  California (allowed some construction to proceed).

Key Terms:

  • Jurisdiction: Order only applies to projects within the jurisdictional limits of Atlanta.
  • Date and Time of Effect: March 24, 2020 at Midnight.

Impact on Construction Projects: shutters construction projects that are not deemed “Essential Infrastructure” or “Essential Business” as defined by or enumerated in the Order.

  • Essential Infrastructure” is limited to projects for public works construction, airport operations, public transportation, utilities, and telecommunications, etc.  It generally does not capture more commercial construction, like warehousing or housing.
  • Essential Businesses” provides additional categories related to construction, including:
    • Healthcare operations and infrastructure;
    • Businesses that provide shelter for economically disadvantaged individuals (affordable housing projects may qualify);
    • Educational facilities; and
    • Residential facilities and shelters for seniors, adults or children.
  • General commercial construction projects like hotels, apartments and warehouses likely do not qualify.

Further Considerations:

  • Construction Industry Stakeholders should review FMG’s COVID-19: Commons Issues in Construction Contracts
  • Contractors should evaluate all existing construction contracts within the City’s jurisdiction, to determine what their rights and obligations are, including notice requirements.
  • Developers should evaluate whether they have any recourse under existing insurance policies, including business interruption and builder’s risk. Typically these policies are not implicated absent direct physical damage to property, but the results depend on the specifics of each policy.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

COVID-19: Common Issues in Construction Contracts.

Posted on: March 23rd, 2020

By: Catherine Bednar, Jake Carroll and Ben Dunlap

On March 17, 2020, Boston became the first U.S city to order a halt to work on all construction sites due to the coronavirus, shutting down work two weeks. Since then, other states and cities have issued shutdown orders due to the pandemic, varying significantly in their scope and impact on the construction industry.  Pennsylvania’s governor ordered a shutdown of all “non-life sustaining business”, including both residential and nonresidential building construction in that list.  In contrast, California issued a statewide “stay-home” order which initially appeared to encompass the construction industry, but a day later issued a list of “Essential Critical Infrastructure Workers” which exempted construction workers from the order, including housing construction. Georgia’s governor lifted certain time restrictions for owners to retain private inspectors to approve plats and perform building inspections for code compliance. In some areas, it is anticipated that construction workers may be moved from their previous assignments to new priority projects, such as temporary hospitals.

Regardless of jurisdiction, it is inevitable that the construction industry will be significantly impacted by the current pandemic, whether due to government-ordered shutdowns, supply chain delays, the absence of sick or quarantined employees, or other business interruptions. The legal consequences and available remedies will depend upon the individual contracts governing a particular construction project.  The following is an overview of some relevant contract provisions and remedies which may come into play on construction projects affected by the present crisis.  In particular, parties to a construction contract may benefit from invoking contract remedies that preserve their ability to successfully complete the project in the future, rather than unilaterally terminating the agreement when performance is impeded due to difficult and unforeseen circumstances.

Potential Claims for Delay Damages and Liquidated Damages:  An immediate concern of owners, contractors and subcontractors is the potential for delay-related claims, including those based on liquidated damages clauses in construction contracts triggered by delays in project completion. A liquidated damages clause specifies the amount of money that must be paid as damages for failure to perform under a contract. Some construction contracts contain “no damage for delay” provisions which can prevent a party from recovering time-related costs when the project is delayed. The potential for delay damages or liquidated damages depends upon the contract language.

As discussed below, some contracts contain force majeure clauses that may excuse delays based on a construction ban or generally caused by the coronavirus pandemic. Others contain extension of time clauses that govern whether and how delay damages will be calculated.  Alternatively, parties to a construction contract may be able to suspend work, terminate the contract for convenience, or enter into a forbearance agreement to avoid or mitigate these damages.

Overhead and Mobilization Costs: Aside from direct delay damages, state and local government bans and other impacts of the pandemic will likely result in increased project costs as leased equipment sits idle and crews eventually have to be remobilized to continue their work when the bans are lifted. Contractual parties may dispute who should bear the added cost of extending equipment leases through the period of the moratorium or remobilizing crews and equipment to sites. The costs of securing construction sites at the beginning of the ban and of preparing sites for continuation of work at the end of the moratorium – as well as maintenance of skeleton crews – may also be substantial, and parties should consider how such costs should be allocated under the contract.

Force Majeure Clauses: Some construction contracts contain a force majeure clause, which serves as a defense against non-performance due to factors beyond the breaching party’s control. A force majeure clause may excuse performance altogether or may provide for an extension of time to perform. Force majeure clauses may specifically reference emergencies declared by the state or federal government, prolonged shortages of supplies, or may more generally refer to extreme and unusual events amounting to an Act of God. Whether the coronavirus pandemic triggers a force majeure clause depends on the contract language and applicable law.

Extension and Suspension of Work Clauses: Many construction contracts provide for parties to request extensions of time to complete performance, while other contracts permit suspension of work or production for a defined or indefinite time. The contract should dictate the procedures for the schedule change: many contracts require that the contractor notify the owner of a delay beyond the contractor’s control and make a written request for an extension of time, while others provide that additional time may be requested through change orders. Both extensions and suspensions of work allow the Project schedule to be revised once the parties determine an extension or suspension is warranted. Still, the language of the contract would determine what, if any remedies are available to the contracting parties, such as recovery of re-mobilization and extended duration costs.

Termination for Convenience Clauses: Typically, a general contractor or owner can terminate the contract “for convenience”—for any reason. In these scenarios, the general contractor or owner would likely be required to pay for work completed or produced before the termination, but typically not unearned profits on work not performed. Such clause would result in an orderly and fairer termination of the contract. Termination of a contract is a drastic remedy, and should not be undertaken lightly. Should a termination be deemed as “wrongful,” the terminating party could be liable for additional damages, including attorneys’ fees, lost profits, and interest of any amounts outstanding.

Forbearance Agreements: a forbearance agreement is a contractual agreement that can address delays or non-performance without resorting to termination or default. In the commercial lending industry, forbearance agreements can extend the time for a borrower to make payments on a construction loan. Construction companies should keep in mind that forbearance agreements are not limited to financing contracts, and can also be used to postpone termination of a construction contract. Under such an agreement, for example, an owner might refrain from declaring the contractor in default or terminating the construction contract, provided that the contractor meet certain agreed-upon milestones. Or, the owner might simply agree to toll any claims of breach against the contractor for non-performance during the construction ban and for a period of time thereafter.

Insurance and Financing: In addition, project-related insurance policies may need to be extended, resulting in higher costs. For project owners and developers, construction delays caused by COVID-19 may lead to added financing and carrying costs. Parties to construction contracts should work to ensure they continue to meet the contract’s insurance requirements.  Parties to construction costs will also be well-served by identifying added costs and seeking solutions early.

Surety Bonds: Keep in mind that many surety bonds require that notice of a change to a Project’s costs or duration must be timely given to the obligated surety. Failure to comply with such requirements could serve as a defense to payment or performance by the Surety at a later date.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

 **DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Georgia Court of Appeals Upholds Statute of Limitations Defense in Exterior Siding Case

Posted on: January 9th, 2018

By: Jan S. Sigman

In Georgia, a negligent construction action must be brought within four years from when the right of action accrues. The right of action accrues when the plaintiff first could have maintained the action to a successful result, which means substantial completion of the project in original construction cases or the sale of the property in improvement cases.

O.C.G.A. § 9-3-30(b)(1) carves out a specific exception to this general rule. If the damage is due to the manufacture, design or installation of synthetic exterior siding, then the right of action accrues “when the damage to the dwelling is discovered or, in the exercise of reasonable diligence, should have been discovered, whichever first occurs.” The Georgia Supreme Court has interpreted this exception to require the plaintiff to bring an action within four years of learning of potential problems with exterior siding. Scully v. First Magnolia Homes, 279 Ga. 336 (2005).

Recently, the Court of Appeals reaffirmed the Scully rule. In Demere Marsh Assocs., LLC v. Boatright Roofing & Gen. Contr., Inc., 343 Ga. App. 235 (2017), a homeowner’s association sued a contractor and a subcontractor for negligent design and installation of vinyl siding following water damage in multiple residential buildings. The contractor and subcontractor moved for summary judgment, arguing certain claims were time barred. The trial court disagreed, holding there was a factual dispute as to whether the homeowner’s association knew or should have known of siding problems between 2008 and 2012, when the lawsuit was filed.

The Court of Appeals reversed the trial court’s denial of summary judgment and, citing Scully, held the statute of limitations began to run when the homeowner’s association, “through the exercise of reasonable diligence, should have discovered that their [buildings were] being damaged due to defective synthetic … siding.” The Court of Appeals pointed to maintenance records showing water intrusion complaints dating back to 2004 and a report from a hired consultant in 2007, which identified improperly installed vinyl siding. The Court of Appeals concluded the statute of limitations began to run in 2007 and expired in 2011, well before the 2012 suit was file.

The Boatright case confirms Georgia courts will uphold statute of limitations defenses in construction cases, even those involving the exterior siding exception. Jan Seanor Sigman is licensed to practice in Georgia and represents contractors and design professionals in all construction matters including contract negotiations, payment disputes and delays, contract terminations, and defective work. If you have any questions or would like more information, please contact Jan Seanor Sigman at [email protected].

Recent Georgia Court of Appeals Decision a Cautionary Tale for Subcontractors

Posted on: July 28th, 2014

By: Gautam Y. Reddy

The Georgia Court of Appeals recently issued an opinion dismissing a paving subcontractor’s claims for payment. The case, First Bank of Georgia v. Robertson Grading, Inc., (Case No. A14A0701), represents a rather harsh result for the subcontractor, Robertson Grading. In doing so, it serves as a reminder for subcontractors in Georgia to follow certain prudent business practices.

The facts are as follows: Robertson contracted with general contractor R & B Construction to perform paving work at a project for around $400,000. To ensure that R & B had sufficient funds to pay for this work, Robertson asked for and received a list of credit references from R & B. This list included First Bank of Georgia (“the Bank”), the eventual defendant in this action. Before beginning work but after signing the contract, Robertson met with the Bank. During this meeting, the Bank reassured Robertson that it “would get paid for the paving” and that it would notify Robertson if any problems arose.

Satisfied with this assurance, Robertson began paving and subsequently submitted its first invoice to R & B for around $124,000. However, R & B did not pay this invoice, thus prompting Robertson to meet with the Bank. During this meeting, the Bank stated that it wanted to issue one check at the end of the work and promised that Robertson would get paid. Robertson then told the Bank that it expected the paving work to be finished in two to three weeks. However, Robertson’s work was delayed because R & B requested extra work. Due to this request and increased material prices, Robertson’s final invoice totaled nearly $450,000. Robertson was not paid for this invoice either so it again contacted the Bank. This time, the Bank informed Robertson that because R & B had missed its last payment on its construction loan, the Bank was no longer disbursing funds on the account.

In response, Robertson filed a lien on the property while R & B simultaneously filed for bankruptcy. Unfortunately for Robertson, the bankruptcy court found that the lien was not properly perfected. Thus, Robertson’s only option was to seek payment as an unsecured creditor. The Bank then foreclosed on the property and managed to sell it all for a profit of over $1 million. It later admitted that these sales would not have been possible if the streets were not paved.

Upon reading these facts, one would assume that Robertson should have some sort of legal recourse against the Bank. Indeed, Robertson brought claims of promissory estoppel, unjust enrichment, negligent misrepresentation, and fraud. At the trial court, the jury found in favor of Robertson on the first three claims and awarded it $448,600.65 in damages and $149,500 in attorney’s fees. However, the Georgia Court of Appeals reversed this ruling, holding that the trial court erred in not dismissing each of these claims.

For the promissory estoppel claim, the court stated that Robertson had to show that it reasonably and exclusively relied on the Bank’s promises.  Here, Robertson had already contracted with R & B before talking to the Bank. Thus, the court held that Robertson could not have relied on the Bank’s promises in entering the contract.

Robertson also asserted a promissory estoppel claim for the Bank’s promise that it would issue one final check after completion of the work. The court held that the Bank’s promise was conditioned on Robertson completing the work in two to three weeks, as it represented to the Bank. Although Robertson was not responsible for the delay, the court noted that Robertson did not communicate this to the Bank. Thus, the court held that Robertson “unilaterally changed the terms on which the promise was made” and could not sustain a claim for promissory estoppel.

Next, the court held that Robertson’s negligent misrepresentation claim must fail because there was no evidence of proximate damage from the Bank’s negligent misrepresentation. In layman’s terms, this means that Robertson could not show that the Bank’s misrepresentation was the cause of any economic damage it suffered. Again, the court’s reasoning was that Robertson contracted with R & B prior to meeting with the Bank. Thus, any misrepresentation the Bank made regarding its ability to pay had no effect on Robertson’s decision to contract with R & B. The court held that R & B’s default on the loan was the proximate cause of the damages. R & B’s default was unrelated to any misrepresentations made by the Bank.

Finally, the court addressed Robertson’s unjust enrichment claim. Here, the court simply stated that under Georgia case law, Robertson’s sole remedy was filing a lien and that any enrichment by the Bank was not unjust because it resulted via foreclosure. The Bank’s enrichment did not result from any contract it had with Robertson because Robertson’s only contract was with R & B.

This case serves as a valuable lesson for subcontractors operating in Georgia. First, if you have any doubts about the general contractor’s ability to pay, confer with its creditors before signing the contract. Second, do not take a creditor’s promise to pay at face value without some sort of written agreement. Here, even though Robertson was not paid on its first invoice, it did not file a lien or take any other such measure. Instead, it relied on the Bank’s assurances and ultimately paid the price for this. Finally, make absolutely sure to perfect any liens you file. Robertson could have avoided much of this predicament by simply perfecting its lien.