COVID-19 has created a severe disruption to the construction industry. Certain jurisdictions, including Boston, San Francisco and Pennsylvania, have placed restrictions on construction projects deemed “nonessential” and require waivers for certain projects to continue. Owners, contractors, suppliers and others may currently have more questions than answers. This article addresses some important concerns, and provides links to additional resources that more specifically address these concerns.
Continue Reading COVID-19 and the Construction Industry: Important Considerations

Neshaminy Constructors, Inc. v. Concrete Building Systems, Inc.
2007 U.S. Dist. LEXIS 69197, Civil Action No. 06-1489 (E.D. Pa. 2007)
The United States District Court for the Eastern District of Pennsylvania conducted a bench trial in which the primary question was whether a contract had been formed between a contractor and subcontractor in connection with a project for which the contractor submitted a bid proposal utilizing, in part, the subcontractor’s bid proposal for calculating the total price for the work. Relying on Pennsylvania common law, the Eastern District held that use of a subcontractor’s bid, by a general contractor in the submission of its own bid to the owner, in and of itself is not sufficient to create a binding contract.
Continue Reading Federal District Court in PA Holds Contractor’s Use of Subcontractor’s Conditional Bid Proposal in its Bid to Owner Insufficient to Form Enforceable Contract

Dur v. Western Branch Diesel, Inc.
2007 U.S. App. LEXIS 16237 (4th Cir. July 9, 2007)
Following the precedent of the Supreme Court of Virginia in Sensenbreunner v. Rust. Orling & Neale, Architects, Inc., 374 S.E.2d 55 (Va. 1988), the Fourth Circuit Court of Appeals upheld the district court’s grant of a motion for summary judgment. The Court held that damage to an owner’s boat caused by an electrical fire fell within the scope of the contract between the owner’s general contractor and the subcontractor and amounted to nothing more than economic loss, which barred the owner from maintaining a cause of action for negligence against the subcontractor.
Continue Reading Fourth Circuit Court of Appeals Holds Owner’s Negligence Cause of Action Against Subcontractor Barred by the Economic Loss Rule

Charles Boyd Construction Inc. v. Vacation Beach, Inc.
No. 5D06-2168, 2007 Fla. App. LEXIS 9597 (Fla. Dist. Ct. App., June 22, 2007)
Following the precedent of the United States Supreme Court in Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (U.S. 2006), the Fifth District Court of Appeal of Florida reversed its prior decision and held that whether a contract is illegal in its entirety and, thus, an arbitration provision contained therein would be unenforceable, must in the first instance be decided by the arbitrator, and not a court.
Continue Reading Florida Court Holds that Arbitrator, Rather Than Court, Should Determine Validity of Contract

EBWS, LLC v. Britly Corporation
2007 VT 37; 2007 Vt. LEXIS 69 (Vt. May 25, 2007)
The Vermont Supreme Court held that the cost of an owner’s anticipated voluntary payments of employee wages and for product purchases during the temporary shutdown of a creamery pending repair of construction defects were not recoverable consequential damages because they could not reasonably have been within the contemplation of the defendant when it contracted to build the creamery.
Continue Reading Vermont Court Reverses Award Of Consequential Damages To Owner In Construction Defect Case

Menorah Home and Hosp. for the Aged and Infirm v. Fireman’s Fund Ins. Co.
2007 U.S. Dist. LEXIS 27684 (E.D.N.Y., April 13, 2007)
The District Court for the Eastern District of New York held that a liquidating agreement between an Owner and a Surety was valid and enforceable, even though it permitted the Owner to retain any recovery it obtained from the third-party, rather than having money pass-through to the surety.
The case arose out of a project to build and renovate facilities for Menorah Home and Hospital for the Aged and Infirm (“Owner”). The Owner entered into a contract with J.A. Jones Construction Group, LLC (“Jones”) for the Project. When Jones defaulted, Fireman’s Fund Insurance Company (“FFIC”), Jones’ surety, took over and completed the Project. The Owner subsequently sued FFIC alleging that FFIC had breached its performance bond obligations by failing to complete the Project in a timely manner and correct deficiencies in the work performed by Jones.
Continue Reading NY District Court Enforces Liquidating Agreement Between Owner And Surety That Permitted Owner To Retain Recovery Obtained From Third Party To Satisfy Owner’s Claim For Damages Against Surety

Lanier at McEver, L.P. v. Planners and Engineers Collaborative, Inc.
2007 GA App LEXIS 539 (Ga. Ct. App., May 16, 2007)
In this case, the Court of Appeals of Georgia affirmed a decision limiting an owner/developer’s damages against the project engineer to the fees paid for the engineer’s services.
The court held that a damages limitation clause that limits the amount of damages an engineer could possibly pay to an owner/developer is neither a violation of public policy nor an unenforceable penalty. Lanier, was the owner/developer of an apartment complex. Lanier hired the defendant engineering firm PEC, to design various aspect of the apartment complex, including the storm sewer and sanitary sewer drainage and management system. The engineering agreement contained a limitation of liability provision stating that the total aggregate liability of PEC and its subconsultants to Lanier “shall not exceed PEC’s total fee for services rendered on this Project.” Following construction of the Project according to the plans and specifications prepared by PEC, problems arose with the storm water system that required modification and repair by the owner. As a result, Lanier sued PEC for negligent design, breach of express contractual warranty and litigation expenses.
Continue Reading Georgia Court Enforces Limitation of Damages Clause in Engineering Agreement

Scandale Associated Builders & Engineers, Ltd. v. Bell Justice Facilities Corp.
No. 4:03-CV-1773, 2007 U.S. Dist. LEXIS 25112 (M.D. Pa. April 4, 2007)
In January 2001, Scandale Associated Builders & Engineers, Ltd. (“Scandale”) entered into a subcontract (“Subcontract”) with Bell Justice Facilities Corporation (“Bell”) for work on the construction of the U.S. Penitentiary/Federal Prison Camp at Canaan, Pennsylvania (“Prison”). The Subcontract required Scandale to perform cast-in-place concrete work on the Prison. Bell was the general contractor and the United States through the Federal Bureau of Prisons was the Owner.
Continue Reading Contractor’s Insistence That Subcontractor Execute Release Not Required By Subcontract As Condition To Final Payment Permits Imposition Of Penalty Interest Under Pennsylvania Contractors And Subcontractors Payment Act

MidAmerica Construction Management, Inc. v. MasTec North America, Inc., et al.
2006 U.S. App. Lexis 3022 (10th Cir. 2006)
In MidAmerica Construction Management, Inc. v. MasTec North America, Inc., et al., 2006 U.S. App. Lexis 3022 (10th Cir. 2006), the Court held that a subcontract agreement contained a “pay-if-paid” clause, and that the clause in question was enforceable under both Texas and New Mexico law. As a result, general contractors did not need to pay the subcontractor for the work that the subcontractor performed under the contract, because the general contractors had not been paid by the project owner for that work.
Continue Reading Terms Of Subcontract Containing A “Pay-If-Paid” Clause Enforceable Under Both Texas And New Mexico Law

Matrix Construction, LLC v. Barton Malow and Schoolcraft College
2006 Mich. App. LEXIS 429, No. 265156 (February 21, 2006)
In Matrix Construction, LLC v. Barton Malow and Schoolcraft College, 2006 Mich. App. LEXIS 429, No. 265156 (February 21, 2006), the Court held that a contractor could not maintain a suit against a construction manager for negligence where the alleged duty arose under the construction manager’s contract with the owner.
Contractor, Matrix Construction, LLC entered into a contract with Owner, Schoolcraft College to furnish and install numerous items for a construction project. Owner also contracted with Construction Manager, Barton Malow to manage and supervise Contractor’s work on the project. Contractor filed suit against Construction Manager alleging that Construction Manager negligently managed the project by failing to properly “supervise, coordinate, plan and schedule the work performed on the project.”
Continue Reading Contractor Could Not Maintain Suit Against Construction Manager For Negligence