Volume: 23, Issue: 8 - 05/01/2025
When signing off on a change order, contractors may reserve the right to seek some additional increased costs that may be incurred as a result of the change. Sometimes referred to as “carve-outs,” these reservations are interpreted narrowly. The contractor only reserves the rights it expressly defined.
A contractor signed a bilateral contract modification that reserved the right to seek “any time extension due to the changed work, and resulting increased cost.” The contractor did not seek a time extension, instead electing to accelerate the pace of the work in order to avoid winter work conditions. The contractor could not recover the cost of acceleration.
The second case in this issue involves the mechanic’s lien rights of an unpaid architect. The architect did not have a contract with the property owner and did not provide any services on site. The architect had no recourse.
The third case addresses a situation in which the contract documents described subsurface conditions through test boring logs, but warned of “local variations.” This effectively placed the risk of certain undisclosed, latent conditions with the contractor.
Carve-out language in a waiver in a contract modification reserved a contractor’s right to the increased costs of a time extension. The contractor, however, did not request an extension and accelerated the work to mitigate winter work conditions. The reservation did not apply to the contractor’s acceleration costs.
An architect did not contract with the property owner for the preparation of plans. The work was never constructed, so neither the architect nor its staff participated in activities at the job site. Therefore, the architect was not entitled to mechanic’s lien protection to secure its payment.
A contract placed the risk of “local variations” in subsurface materials with the contractor. Expert opinion established that a site condition, while latent and undisclosed, should have been anticipated by the contractor.
Volume: 23, Issue: 7 - 04/15/2025
Design specifications mandate the details of construction. The contractor is obligated to strictly conform to these directives. Consequently, the project owner extends an implied warranty to the contractor that a design specification is sufficient for the project and free from defects.
Performance specifications establish characteristics and capabilities required of the completed work. The contractor has the right and the obligation to devise the details that will meet these standards. At the same time, the owner’s implied warranty of the plans and specifications does not extend to performance specifications.
Challenges can arise because design documents are seldom labeled as design or performance. The U.S. Court of Appeals for the Federal Circuit was recently presented with a situation in which a set of contract drawings was labeled “conceptual” and “preliminary.” Yet a note on one of the drawings stipulated a precise thickness for a foundation slab. Did the government project owner warrant the sufficiency of that dimension?
The second case in this issue involves the right of a sole shareholder to represent a corporation in court. The non-attorney could represent a registered sole proprietorship but not the corporation, which was a distinct legal entity. The sole proprietorship, however, was not a party to the dispute.
On a design-build contract, a depiction in a conceptual drawing, combined with a drawing note, was more specific than a performance standard. This was a design specification and when it proved insufficient, the government was liable for breaching its implied warranty of the specification.
The sole shareholder and president of a corporation could not represent the corporation in court because the individual was not a licensed attorney and the corporation was a distinct legal entity. The individual could represent herself pro se, but there was no evidence her sole proprietorship had been a party to the matter in question.
Volume: 23, Issue: 6 - 03/31/2025
Construction contracts are sometimes stated as fixed price, but that price is the sum of a series of unit-priced line items. Payments under the contract are based on the fixed price. The unit prices may, or may not, be useful in pricing progress payments or changes in the work. Otherwise, what is their purpose? The Rhode Island Supreme Court was recently presented with an analogous dilemma under an architectural services agreement.
The design contract stipulated what it called a “fixed lump sum fee.” Progress payments based on that fee were to be made at various milestones in the design process. The contract also stated compensation was calculated as 11% of the estimated construction cost, with final payment to the architect subject to adjustment based on actual construction cost. The architect performed 80% of the design work; however, the project was never constructed as designed.
The second case in this issue involves a bidder’s right to withdraw a mistaken bid and recover its bid security. A Virginia state statute gave public project owners the right to reject mistaken bids, but it was silent regarding the rights of the bidder. Could a low bidder alleging a transcription error during the bidding process force the project owner to release it from its bid?
The third case interprets the “Damage to Work” standard federal construction contract clause. Is the storm surge placement of debris on the job site “damage?” And, is the removal of that debris “repair”?
The fee provision in an architectural services agreement used language of both lump sum and percentage of construction cost. The provision was not ambiguous, however. A reasonable reading established it was a fixed-price fee. Language regarding adjustment of final payment based upon actual construction cost did not apply because the project was never constructed as designed.
While a state statute regarding a public project owner’s right to reject a mistaken bid was ambiguous, precedent from other states established a corresponding right for a bidder to withdraw its mistaken bid. And, the bidder was entitled to the return of its bid security.