Past Performance of Newly Formed Company

Public agencies may use past performance to award a contract to the lowest and best bidder or reject a bid. Occasionally, construction companies may dissolve or form new companies. The reasons for a change in a company’s corporate structure may vary. However, the good and/or the bad may follow the newly formed company. This issue was addressed a number of years ago by the Mississippi Attorney General and the position explained as follows:

[I]f a bidder presenting a valid COR number is a company with which DFA/BOB has no past experience or past performance history, DFA/BOB may consider past experience with or past performance of the company from which the bidder originated, the bidder’s parent company, or the company with which the bidder merged, partnered, or changed names.

The Attorney General went on to state that a public agency can also reject an apparent low bidder "who submits a bid under the same COR number as its predecessor, predecessor in name, parent company, or merger/partner" where the public agency considers a poor past performer. [Link to AG Opinion No. 2003-649].

The important point to understand is that good and/or poor past performance follows the COR number which is held by the qualifying party.

SBA Issues Final Rule Establishing Regulations for WOSB and EDWOSB Set-Asides and Sole-Source Contracts

On September 14, 2015, the Small Business Administration published its final rule implementing new regulations for awards to Women-Owned Small Business (WOSB) and Economically Disadvantaged Women-Owned Small Businesses (EDWOSB). Now, as with other "special status" concerns such as 8(a) and Service Disabled Veteran Owned businesses, women-owned businesses will have access to set-aside and sole-source contracting opportunities. The legal basis for this final rule is §825 of the National Defense Authorization Act for Fiscal Year 2015.

 

Under the current WOSB program, SBA reports that WOSBs received approximately $15 billion in contract actions according to FY 2013 small-business goaling reports. The new sole-source authority for awards to EDWOSBs and WOSBs can only be used where a contracting officer’s market research cannot identify two or more WOSBs or EDWOSBs that can perform at a fair and reasonable price but identifies one that can perform. WOSB and EDWOSB competitive set-asides and sole-source contracts can only be awarded in those industries for which WOSB and EDWOSB opportunities are authorized.

 

The final rule announced in the Federal Register is attached here and becomes effective October 14, 2015.

Pay-If-Paid or Pay-When-Paid Clause May Not Preclude Subcontractor Payment Bond Claim or Filing of Lien

Many subcontracts expressly condition payment to the subcontractor on receipt of payment from the owner by the prime contractor. Such a provision is typically labeled as a "pay-when-paid" clause. This clause postpones the time for payment to the subcontractor until payment is made by the owner or for a reasonable period of time. Thus, "pay-when-paid" clauses simply require a reasonable time to pass before payment is due and owing to the subcontractor, regardless of payment by the owner. Whereas, a "pay-if-paid" clause is intended to shift the risk of non-payment of the owner to the subcontractor and makes payment by the owner an express and absolute condition precedent to the prime contractor’s payment to the subcontractor.

These clauses have been enforced by some courts where the language in the clause makes payment by the owner to the prime contractor an express condition precedent to payment of the subcontractor. Nonetheless, subcontractors may have the ability to recover payment from the prime contractor’s surety where a payment bond has been furnished. As explained by one federal court:

The Miller Act is ‘highly remedial in nature,’ and so ‘entitled to a liberal construction and application in order to properly effectuate the Congressional intent to protect those whose labor and materials go into public projects.’ ‘[C]ommon sense dictates that it would defeat the policy underlying the Miller Act to read a pay-when-paid clause as precluding a subcontractor from bringing suit until its contractor receives payment.’ To enforce a pay-when-paid clause in this context would delay many claims beyond the Act’s one-year statute of limitations, and would thus render the clause an implicit waiver of the subcontractor’s Miller Act rights.

(Citations omitted.) This same rationale could also be applied where there is a "pay-if-paid" clause in the subcontract and under Mississippi’s payment bond statute.

Even if a payment bond has not been furnished on a project, a subcontractor on a private project may be able to file a lien and action to enforce the lien to avoid non-payment by the owner to the prime contractor. See generally, Miss. Code Ann. §§ 85-7-401, et al.

If you want to play, you have to pay.

Just because you have included an arbitration provision in your contract does not mean that any dispute arising out of or related to the contract will be arbitrated. The Mississippi Supreme Court found in Sanderson Farms, Inc. v. Gatlin, that the refusal to pay the required share of the American Arbitration Association ("AAA") fee resulted in Sanderson Farms, Inc. ("Sanderson") waiving its right to arbitration. In that case, the arbitration clause provided in pertinent part as follows:

The cost of such arbitration will be divided equally among the parties to the arbitration. Each party will bear the costs of their own expenses and attorney’s fees. Failure to arbitrate all such claims or controversies arising under or related to this Agreement shall be deemed a breach of the Agreement.

Gatlin paid its share of the arbitration fees but Sanderson failed to pay its share. Gatlin filed suit in circuit court against Sanderson who filed a motion to dismiss arguing that the dispute was subject to arbitration. The circuit court denied Sanderson’s motion to dismiss. On appeal the Supreme Court held:

Sanderson farms waived its right to arbitrate by refusing to pay its one-half of the cost associated with the filing and administrative fees and/or the additional charges presented for payment one month before the scheduled arbitration hearing. This refusal amounts to an act inconsistent with the right to arbitrate. By waiving its right to arbitrate, Sanderson Farms has relinquished the right to seek the protections of the arbitration provision in the boiler contract.

It should also be noted that Rule 54 of the AAA Commercial Rules and Rule 56 of the AAA Construction Industry Arbitration Rules provide for procedures where a party has not paid its share of the arbitrator compensation or administrative charges.

The bottom line is a party may waive its right to arbitration if it does not comply with the requirements set forth in the arbitration clause and find itself in court rather than in arbitration.

Late Payment on Private Projects--When can a contractor recover late payment interest under Miss. Code Ann. §87-7-3?

If you are a contractor and submitted an application for a progress payment on a private construction project the owner should make timely payment under the terms of the contract.  However, all too frequently the owner does not make that timely payment.  If this occurs, contractors should look to Miss. Code Ann. §87-7-3 for relief.  It provides, with regard to progress payments as follows:

…If they [partial, progress or interim payments] are not paid within thirty (30) calendar days from the day they were due and payable, then they shall bear interest from the due date at the rate of one percent (1%) per month until fully paid.

Miss. Code Ann. §87-7-3(a).

This statute also provides the same relief where final payment is requested by the contractor and payment is not made within thirty (30) calendar days from the first occurrence of either (1) substantial completion under the terms of the contract, (2) beneficial use and occupancy by the owner, or when the project is certified as complete by the architect or engineer. Miss. Code Ann. §87-7-3(b).

Unfortunately, this interest is not automatic unless the amount requested is liquidated.  This was made clear by the Mississippi Supreme Court in a recent decision.  There was a dispute between the owner and the contractor concerning the amount due and owing under the contract.  The contractor demanded pre-judgment interest under Miss. Code Ann. §75-17-1 Ann. and late payment interest under Miss. Code Ann. §87-7-3.  In denying both of these requests the Court concluded:

Neither Section 75-17-1 nor Section 87-7-3 mentions whether monies owed contractors must be liquidated in order for the respective statute’s grant of prejudgment interest to apply.  However, the same considerations which preclude a recovery of prejudgment interest for unliquidated amounts owed under Section 75-17-1 apply to Section 87-7-3.  Therefore, Stubbs [the contractor] must show that his claims against the Falkners [the owner] were liquidated prior to the judgment in order to recover prejudgment interest under either statute.

Falkner v. John E. Stubbs d/b/a Mississippi Polysteel, 121 So.3d 899, 903 (Miss. 2013).  Damages are considered unliquidated if they are not set forth in the contract or cannot be established by a fixed formula. Id.

The bottom line is that contractors need to make sure that the payment provisions of the contract are clear and that any schedule of values is sufficiently detailed to identify the item of work and the value which the parties have agreed to assign to this item.  Of course, any change order work should also be priced and agreed to avoid creating a disputed and unliquidated amount.

 

 

 

 

Delay in Issuance of Time Extension May Constitute Active Interference or Bad Faith

Contractors frequently encounter circumstances where they are entitled to an extension of the contract time and request the extension, but, in some instances, the owner and/or architect refuses to timely act on the request by either granting or denying the request. When a contractor encounters such a circumstance, it must decide whether to accelerate its performance to avoid missing the contract completion date and being assessed damages by the owner or maintain its schedule based upon the assumption the contractor will receive the extension and risk a potential termination for default by the owner for not making adequate progress toward the completion date. This is the very reason why the Mississippi Supreme Court suggested that the "refusal to grant extensions on a timely basis can reasonably be interpreted as active interference or bad faith" and could justify the award of damages to a contractor.

Contractors should therefore not just request an extension of time with supporting documentation but also demand a timely response. If no response is forthcoming, the contractor should then advise the owner and/or architect of the consequences of a further delay in a decision.

Waiver of Right to Assess Liquidated Damages

Contractors who have a liquidated damage provision in their contracts should be aware that their assessment can be waived by the conduct of the owner.  The Mississippi Supreme Court has found that an owner was estopped from asserting delay damages where it failed to timely assert that right.  Contractors faced with a liquidated damage provision may therefore be able to defend against assessment of these damages where the owner fails to affirmatively and timely assert the right to them.  This may occur when the owner waits until the end of the project, long after the completion date has passed, to claim its right to liquidated damages without deducting them as they accrue.

Oral contracts - be careful what you say.

There are plenty of different ways that a contractor can get in trouble with an owner or its subcontractors.  One is to talk too much and wind up entering into a separate enforceable oral contract.  The existence of an oral contract is a factual issue that will be decided by a jury or a judge in a trial without a jury, also known as a bench trial.  However, the formation of a contract requires three (3) simple elements: (1) an offer, (2) acceptance of the offer, and (3) consideration. If those elements are proven by one of the parties, an enforceable contract may have been formed and someone may have to pay.  There are some limited situations in which the law requires that a contract be in writing.  Nevertheless, the best course of action is to speak with caution so that there is no opportunity to argue that an oral contract was made.

And remember, the statute of limitations for an oral contract is three (3) years. Miss. Code Ann. §15-1-29. So, you may want to watch what you agree to do or you may lose sleep for quite some time until the statute of limitation expires.

Who can be a "Qualifying Party" for a Contractor's Certificate of Responsibility - Update

On May 13, 2009, I published a blog titled "Who can be a "Qualifying Party" for a Contractor’s Certificate of Responsibility". [Click to view blog post] The blog article states that the requirement for a contractor’s Certificate of Responsibility for a public contract is $50,000 and a private contract is $100,000. Since the writing of that blog article, the statute has been amended and effective July 1, 2010, a Certificate of Responsibility is required on all contracts, both public and private, in excess of $50,000.

When do you have a contract with a public entity?

It can be unclear when a contractor bidding on a public construction project actually has a binding contract with a public entity. This question appears to have been addressed by the Mississippi district court in Northeast Mississippi Community College District v. Vanderheyden Construction Company. In that case, the community college had issued an advertisement for bids from qualified contractors for the construction of a new science and math building. The advertisement reserved the right to reject any and all bids. After bids were opened, Vanderheyden was declared the low bid. The Board of Trustees ("the Board") voted to award the contract to Vanderheyden but after the board meeting the second low bidder challenged the award alleging a number of deficiencies in Vanderheyden’s bid. Rather than risk a lawsuit by the second low bidder, the Board decided to rescind the award and readvertise. At the second bid opening the protester on the original procurement was the low bidder and Vanderheyden was the second low bidder.

The issue presented to the district court was whether the Board could properly rescind its prior award to Vanderheyden and readvertise the project. The district court concluded that "a public entity cannot reject all bids and readvertise the project after it has already accepted the lowest responsible bidder." In analyzing the actions of the Board, the district court when on to state:

[T]he court is of the opinion that once the board chose to accept Vanderheyden’s bid, the reserved right to reject any and all bids had not been exercised and it was no longer operative. To hold otherwise would be contrary to well-established principles of contract law and would permit the possibility of favoritism in public bidding, the very evil which the bidding process statutes were enacted to prevent.

Therefore, once a public entity has officially accepted a bid, there is a binding contract between the parties unless the public entity has expressly conditioned the award upon certain requirements.

The Duty to Proceed--Do I really have to do change order work without getting paid?

During the course of construction, contractors will sometimes find that the owner and/or architect are demanding more work than the contractor reasonably interprets the plans and specifications to require. The typical owner and/or architect solution to the dispute is simply to tell the contractor its interpretation is incorrect and direct the contractor to proceed with what the contractor considers additional work. Later, the owner may attempt to rely upon the lack of a written change order authorizing the performance to deny compensation and/or time for performance of additional work.

Does the contractor walk off the job or proceed with the additional work notwithstanding this dispute? Most contracts require contractors to proceed with the work notwithstanding the existence of a dispute; otherwise, the contractor might be subject to a default termination. However, such provisions also typically require the owner to continue payments under the contract for undisputed work. The idea is to keep the project moving forward—i.e., to prevent the contractor from bringing the project to a halt pending resolution of disputed items and to prevent the owner from holding the contractor’s funds hostage pending the resolution of the dispute.The contractor must therefore generally proceed with the performance of additional work without immediate compensation for that work.

However, it does not mean that the contractor is performing the work gratuitously. The refusal of the owner to issue a change order for the additional work may not insulate it from liability. "[U]nder Mississippi law, where the owner orders the contractor to perform extra work outside the contract, the contractor is entitled to compensation for that work, despite the fact that no change order was issued." See Sentinel Industrial Contracting Corp. v. Kimmins Industrial Service Corp. In Sentinel, the Mississippi Supreme Court recognized the inherent inequity in allowing the contractor to demand a subcontractor perform extra-contractual work without a change order and then deny compensation because a change order had not been issued.

This same rationale should apply to the situation where an owner directs the contractor to perform work without a change order. When this occurs, the contractors must place the owner and/or architect on written notice of its objection to the additional work and reserve its right to recover the costs and/or time associated with the change order work. Simply stated, the duty to proceed does not entitle the owner to avoid paying for legitimate change order work even in the absence of a written change order.

Claims for Construction Defects--Where did I put my insurance policy?

Mississippi contractors should know that Mississippi law (§15-1-41) allows a party to bring suit for defective construction within six (6) years “after the written acceptance or actual occupancy or use, whichever occurs first, of such improvement by the owner thereof.”   The last thing a contractor wants to be confronted with, especially if the contractor is no longer in business, is a demand or lawsuit to address allegedly defective work. This scenario may not have seemed likely five years ago, but with the downturn in the economy, many contractors are being forced to close their doors.  Don’t panic—yet. Your insurance or that purchased by your subcontractors where you were identified as an additional insured may provide you with defense and indemnity protection. 

When you do get a demand or served with a lawsuit from a former client alleging defective construction, you should contact your legal counsel and insurance agent. Your legal counsel can advise you how to respond to the demand or lawsuit and your insurance agent can help you find the policy in place when the project was constructed. You will then be in a position to notify your insurance carrier of the situation. Hopefully, your policy will either cover the claim of defective construction or pay for the cost associated with defending against the claim. If your insurance carrier or that of your subcontractor sends you a letter denying coverage, do not take no for an answer—at least not right away. You should have your attorney review the applicable policy language to verify whether there is coverage. 

General Disclaimers in Plans and Specifications

In an attempt to avoid liability for the various deficiencies in its plans and specifications, some architects and engineers rely upon the general disclaimers set forth in the contract documents. However, the United States Supreme Court has held these general disclaimers are unenforceable as a matter of law. In U.S. v. Spearin, the Supreme Court ruled that the Owner is responsible and affirmatively warrants the adequacy of its plans and specifications and that responsibility "is not overcome by the usual clauses requiring builders to visit the site, check the plans, and to inform themselves of the requirements of the work." Similarly, in Baldi Bros. Constructors v. U.S., the U.S. Court of Federal Claims ruled that such general contractual provisions, even including a provision which states the owner does not guarantee the statements of fact in the specifications, will not relieve the owner from liability for providing misleading information to the contractor

Neither the Owner nor the design professional can fully shield itself from liability for its errors and/or omissions in the plans and specifications through disclaimers in the contract documents. Likewise, disclaimers shifting the burden of costs associated with errors and/or omissions are also generally unenforceable. A contractor is therefore typically entitled to rely on the representations in the plans and specifications, but the contractor should nevertheless perform a reasonable site inspection and review of the plans and specifications so that obvious errors and/or omissions can be addressed prior to bidding.

When a contractor does find itself confronted with such general disclaimers and the owner and/or architect nonetheless issues a directive to proceed, the contractor must document its position with regard to the error and/or omission to protect its position. The lack of such documentation may substantially impair, if not be fatal, to the contractor’s claim for additional compensation and/or time.

CONTRACTORS SHOULD PREPARE FOR 3% WITHHOLDING FROM GOVERNMENT CONTRACTS

As part of the Tax Increase Prevention and Reconciliation Act of 2005 ("TIPRA"), Congress required federal, state and local governments to withhold 3% on payments made to government contractors and some others from payments made for property or services. Implementation of the law was set to take effect January 1, 2011, but was delayed until January 1, 2012. The IRS just released its final regulations related to the law. The good news for contractors is that the IRS has delayed implementation until January 1, 2013.

The delays in implementation have resulted at least in part from the passage of the American Recovery and Reinvestment Act. However, unless the law is repealed, the deferment will come to an end and contractors should begin preparing now for its eventual implementation since your cash flow will be impacted. The law is a flat withholding on the gross amount irrespective of any other conditions such as whether the contractor owes any back-taxes or whether the contractor even expects to have taxable income.

When do I have to file a demand for arbitration?

 

Parties frequently include arbitration clauses in their construction documents. In such instances, when a dispute arises, the party with a claim may ultimately need to pursue it by filing a demand for arbitration. When the arbitration clause requires compliance with the American Arbitration Association’s ("AAA") Construction Industry Arbitration Rules, or another alternative dispute organization, the claimant can simply file a demand for arbitration with that organization. When the agreement does not specify an alternative dispute organization or a method for the initiation of arbitration, the claimant must rely upon the procedures set forth in the Mississippi Construction Arbitration Act ("the Act"), Miss. Code Ann. §§ 11-15-101, et seq. (Rev. 2004). Under the Act, the claimant shall:

...within the time specified by the contract, if any, file with the other party a notice of an intention to arbitrate which notice shall contain a statement setting forth the nature of the dispute, the amount involved, and the remedy sought....

According to the Mississippi Court of Appeals, such a "demand for arbitration" must be initiated within three (3) years from the time the cause of action accrues. This issue was addressed by the Court of Appeals in Haycraft v. Mid-State Construction Company, Inc. In that case, Haycraft filed suit against Mid-State sometime in 1994. Mid-State filed a motion to have Haycraft’s complaint dismissed because the agreement between the parties included a provision that permitted Mid-State to require arbitration. The court therefore dismissed Haycraft’s lawsuit.

Approximately six years later Haycraft filed an application for arbitration. Mid-State filed an objection to Haycraft’s demand for arbitration with the circuit court. The court found Haycraft’s application for arbitration untimely based upon the general three (3) year statute of limitation found at Miss. Code Ann. §15-1-49 (Rev. 2003). The Court of Appeals agreed and found Haycraft’s right to demand arbitration began when its cause of action accrued. It was therefore Haycraft’s obligation to initiate an application for arbitration within three (3) years from that date or its cause of action would be barred by the statute of limitation. Because Haycraft did not timely pursue its right to arbitrate, Haycraft’s claim was barred.

The key point to remember is that a claimant must act timely to preserve its right to arbitration. A demand or application for arbitration must be timely submitted to the opposing party or the claim’s right to relief may be barred by the three (3) year statute of limitation.

Choose Your Arbitration Clause Wisely

During the last several decades arbitration has become a valuable method for resolving disputes between parties in the construction setting. A simple arbitration provision might read as follows:

Claims and disputes not resolved shall be decided by arbitration which shall be in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect.  The locale of any arbitration shall be Jackson, Mississippi.

Simple and straightforward, but is it enough? It depends on what your expectations are for arbitration. An arbitrator is bound by the requirements of the arbitration clause. Therefore, if you are drafting an arbitration clause, you might want to consider including certain "bells and whistles" that will get you to the finish line faster. Here are some items you might want to consider including in an arbitration clause. 

  • Location of the arbitration proceeding;
  • Number of arbitrators and experience requirements;
  • Limitations on discovery;
  • Specific rules governing admissibility of evidence at hearing, i.e. state or federal rules of evidence verses the liberal rules for admissibility of the AAA;
  • Time within which arbitration hearing must be conducted; and
  • Payment of fees and costs.

Remember, it is your arbitration clause so draft it to suit your business objectives.

What do I need to include in a request for equitable adjustment?

The objective of a claim is to explain why the contractor is entitled to equitable adjustment in the contract price and time. This requires the contractor to establish (a) entitlement or the contractual/legal right to additional compensation or time and (b) quantum or the amount of additional compensation to which the contractor is entitled. The contractor provides this information in the form of a narrative statement including all relevant supporting documentation.

The general format for any request for equitable adjustment should include the following:

     

  1. Describe what the contract documents required, citing to the specific portions of the plans and specifications (copy and attach relevant portions of the contract document as part of the claim).

     

  2. Describe how the contractor interpreted the contract documents and relied upon this interpretation in preparing its bid and developing a plan for performance.

     

  3. Explain the contractor’s original plan for performance based upon the representations in the contract documents.

     

  4. Describe how the contractor’s plan for performance was changed or impacted. Include citations to correspondence and other documents to support the change and all notifications to architect/owner. (incorporate photographs if available)

     

  5. Set forth the calculations for quantum and include all supporting data (invoices, payroll documents, green book/corps of engineer pages supporting equipment rates, time sheets and/or daily reports etc.)

In these difficult economic times it is essential that a contractor provides a comprehensive and complete document as the first step in the claim process. If the initial claim is thorough and properly supported, it conveys the message that the contractor knows what he is doing and has legitimate grounds for an equitable adjustment. Conversely, a loosely prepared, unsupported claim sends the message that the contractor is just looking for more money and cannot backup the claim. It takes time to prepare a detailed claim, but it is time well spent.

Hurricane Preparedness: Are You Contract Ready?

According to the May 27, 2010, press release issued by NOAA, the National Oceanic and Atmospheric Administration, there is an 85% chance that the 2010 Atlantic hurricane season will be above normal. Specifically, NOAA states: "We estimate a 70% probability for each of the following ranges of activity this season: 14-23 Named Storms, 8-14 Hurricanes, and 3-7 Major Hurricanes."

Hurricane season began June 1, 2010, and we have already gone through "B" in the alphabet of hurricane names. Just this past week tropical storm Bonnie passed through the Gulf of Mexico with everyone holding their breaths that the already damaged coastal areas would be spared further destruction. Bonnie was a reminder that we all need to immediately prepare for the anticipated hurricanes, if not already prepared. Helpful checklists can easily be found on the internet for your preparations. However, one major item is often overlooked: contracts.

A recent decision by the Mississippi Supreme Court highlights the need to be "contract ready" for hurricane season. In the case of Hill Brothers Construction Co. v. Miss. Transportation Comm., Hill Brothers Construction ("Hill Brothers") was hired by the surety to complete a project on which the original contractor had defaulted. The construction contract included a provision that provided for monthly cost adjustments based upon a baseline price established at bidding for pay items such as diesel fuel and asphalt which are affected by oil prices. However, the contract also included a provision which stated: "After the expiration of contract time, including all extensions, adjustments will be computed using fuel and material prices that are in effect at the expiration of the contract time." When the contract time expired and the project was incomplete, the Miss. Transportation Commission ("Commission") applied this provision to change the "baseline price" for adjustment purposes to the price in effect on the date the contract should have been completed.

Thereafter, disaster struck. Hurricane Katrina hit the Mississippi Gulf Coast and the price of petroleum products skyrocketed. The adjustment of the baseline price to the price in effect on the date of the contract expiration resulted in about $500,000 of unreimbursed petroleum costs to Hill Brothers. The Commission refused to pay and Hill Brothers sued. When the trial court granted summary judgment in favor of the Commission, Hill Brothers appealed.

On appeal, the Mississippi Supreme Court agreed that the "Commission’s interpretation of the provision was correct." However, the Court also determined that the provision exceeded the authority granted by statute to the Commission and, therefore, had to be stricken from the contract. This case is but one reminder that the effects of a hurricane will still be sorted out years after the landfall.

Have you prepared for the active hurricane season we now face? Get prepared:

  • Review your contracts, especially the contracts you are contemplating entering into now. Make certain you have provisions that will protect you in the event of a disaster. If you are unsure what a provision means, seek clarification before you sign and modify the language in the contract so it is clear what is meant!
  • If you are a subcontractor, your subcontract often binds you to the terms of the prime contract. What does it say? Do you even have a copy of the prime contract? Get a copy and read every word of it.
  • Consider entering into contracts in advance of disaster that will provide you the assistance and/or pricing you may need if disaster does strike.
  • Review your insurance policies to determine whether your coverage is adequate for the types of losses you might incur, including any unusual contract provisions that might be applied.

Why you need a construction lawyer to defend you against a defective construction claim.

Do you want an attorney that defends personal injury claims or a construction lawyer representing you where there has been an allegation of defective construction associated with the work of a subcontractor?  Obviously, you want an attorney whose practice is concentrated in the area of construction law.

As a preliminary matter, claims asserted by an owner against its general contractor for alleged defective construction are typically complex and costly.  Even "simple" payment disputes between an owner and general contractor can and frequently do evolve into allegations of defective construction by the owner against the general contractor to justify withholding payment.

If an allegation of defective construction is made against the general contractor due to work performed by its subcontractors, the general contractor should consider submitting such a claim under its Commercial General Liability ("CGL") Policy and notify the subcontractor whose work has been called into question and its insurance carrier.  As a general contractor, you should already have a copy of your subcontractor’s certificate of insurance identifying you as an additional insured under the policy before allowing the subcontractor to commence work.

If your insurer denies coverage for the alleged defective construction but agrees to provide you with a defense under reservation of right, you have the right to select a "construction attorney" to defend you against the defective construction claim and your insurance carrier must pay for that defense.  Do not let your insurance adjuster "assign" you to an attorney This is a construction defect case and not personal injury or a car wreck case.  There will likely be issues concerning the interpretation of plans and specifications, scheduling and coordination of the work, the standard of care required to be exercised by various parties involved in the dispute, construction industry standards and construction and design experts.  Make the right choice; retain a lawyer with construction litigation experience to defend you against allegations of defective construction not a personal injury defense attorney.

Hubzone Contracts Take Set-Aside Priority Over 8(a) Program

In Mission Critical Solutions v. United States, COFC No. 09-864 C (March 2, 2010), the Court of Federal Claims has determined that the HUBZone program takes priority over the 8(a) program.

Mission Critical Solutions ("MCS") was certified as both an 8(a) and HUBZone small business. In 2008, the Department of the Army awarded MCS a one-year sole-source 8(a) contract for just under $3.5 million to provide information technology ("IT") services. For the follow-on requirement, which was valued (including options) at approximately $10.5 million (in excess of the applicable $3.5 million ceiling on sole-source contracts), the Army determined it could not make award to MCS. However, the Army decided it could make a sole-source 8(a) award to Copper River Information Technology, LLC ("Copper River"), an Alaska Native Corporation, if the SBA would approve Copper River as the IT provider for the requirement. SBA accepted the requirement on behalf of Copper River under its 8(a) program and the Army made the award.

MCS protested the sole-source 8(a) award to Copper River to the GAO. MCS argued that the Army was required to compete the requirement as a HUBZone business set-aside. The GAO sustained MCS’s protest. However, the Office of Management and Budget ordered that executive agencies disregard the GAO’s ruling until the Office of Legal Counsel of the United States Justice Department ("OLC") reviewed the matter. After the OLC declared its disagreement with GAO, the Army took the position that it had no authority to take any action inconsistent with the OLC’s position. Thus, MCS’s request for protest costs and a second protest against the award were denied by GAO as "academic", because the Army had stated its position that GAO recommendations could not be followed in the matter. MCS took its protest to the Court of Federal Claims.

Chief Judge Emily Hewitt sided with MCS and declared the Army’s award to Copper River under the 8(a) program not in accordance with law. The Army’s argument that there is parity between the 8(a) and HUBZone requirements was rejected. Judge Hewitt found that the HUBZone statute mandates set-asides for competition among HUBZone concerns whenever there is a reasonable expectation that at least 2 qualified HUBZone firms will submit offers and award can be made at a reasonable price. The plain language of the HUBZone statute at 15 USC § 657a(b)(2) requires such set-asides "[n]otwithstanding any other provision of law". Moreover, whereas contracting officers "may" decide to award contracts under the 8(a) program when the HUBZone statutory set-aside criteria are not met, there is no such discretion for contracting officers when the HUBZone statutory are met. Judge Hewitt enjoined the Army from awarding the IT support services contract without first determining whether the "rule of two" is met "such that the contract opportunity at issue in this case must be awarded on the basis of competition among qualified HUBZone small business concerns."

The Limits of Contractual Indemnity

The Mississippi Supreme Court recently made it unmistakably clear that a contractual indemnity provision cannot exceed the limitations set in Miss. Code Ann. § 31-4-41 which provides:

With respect to all public or private contracts or agreements, for construction, alteration, repair or maintenance of buildings, structures, highway bridges, viaducts, water, sewer or gas distribution systems, or other work dealing with construction, or for any moving, demolition or excavation connected therewith, every covenant, promise and/or agreement contained therein to indemnify or hold harmless another person from that person’s own negligence is void as against public policy and wholly unenforceable.

 

This section does not apply to construction bonds or insurance contracts or agreements.

(Emphasis added.)

In this recent decision, the Court considered an indemnity provision in a Shipyard Agreement. The Court found the statute unambiguous and concluded that to the extent that the indemnity provision sought to indemnify one party for its own negligence the provision was void. The Court further held that this defense can be preserved by setting forth the defense that plaintiff failed to state a claim upon which relief can be granted pursuant to Miss. R. Civ. P. 12(b)(6).

Remember to read your contract and carefully consider the language of any indemnity provision when you sign the contract and again if you become involved in litigation. Depending upon the particular circumstances, you might even consider purchasing additional insurance coverage of your own for adequate protection.

"He who hesitates is lost." - Protecting Payment Rights in Mississippi

The Mississippi Court of Appeals has reaffirmed that a subcontractor must file a "Stop Payment Notice" prior to an owner making full payment to the general contractor. Otherwise, the subcontractor loses any hope of payment from the owner based upon that notice and the exclusive remedy for payment is against its general contractor.

In the recently published decision of Summerall Electric Co., Inc., et al. v. Church of God at Southaven, the Church of God at Southaven ("the Church") entered into a contract with an unlicensed general contractor for the construction of a new church. The general contractor engaged a number of subcontractors who performed work on the church but were not paid by the general contractor. The subcontractors filed "construction liens" against the church’s property. However, the subcontractors did not take this action until after the owner had already paid the entire contract amount to the general contractor.

The subcontractors advanced a number of arguments seeking to recover their money directly from the Church.

  • The first argument was that the filing of the "construction liens" gave the subcontractors the right to recover against the Church. The Court disagreed because the Church had already paid the general contractor in full when the subcontractor’s notices were filed. For that reason, the subcontractors were mere creditors of the general contractor with no right to recover from the Church.  
  • The next argument was that because the Church entered into a contract with an unlicensed general contractor the Church should be liable. Under Mississippi law, a construction contract is null and void if a license is required for that contract. The subcontractors apparently argued that because the general contractor was unlicensed the prime contract was null and void and the Church therefore owed payment directly to the licensed subcontractors. The Court disagreed again, finding if the prime contract was null and void, then nothing would be owed to the general contractor and therefore the subcontractors would have no remedy either.
  • Finally, the subcontractors argued that there was an "agency relationship" between the prime contractor and the Church which bound the Church directly to the subcontractors. The Court rejected that argument too on the basis of insufficient evidence.

In the end, the subcontractors were left "holding the bag." The real lesson here is for both subcontractors and general contractors. Know when you are required to be paid and, if payment is late, exercise your remedies under the contract document and the appropriate payment statutes. The saying: "He who hesitates is lost", is not just a cliché but a truism that cannot be ignored in these difficult economic times.

MISSISSIPPI SUPREME COURT COMPELS ARBITRATION AGAINST PURPORTED NON-SIGNATORY TO AGREEMENT

The Mississippi Supreme Court handed down a decision this month upholding the proposition that an arbitration agreement can be enforced against someone who did not sign the agreement. However, the facts of the case were unusual in that the individual (Donna Stuckey) against whom arbitration was ordered presented evidence that at least some of the documents involved in the transactions contained forged signatures.

In this case, the defendants had pledged certain property to the bank as collateral for loans made to their cattle business. Mrs. Stuckey’s name appeared approximately fifty-five times on documents containing arbitration provisions. However, Mrs. Stuckey claimed the only document she actually signed was one deed of trust which did not include an arbitration provision. Mrs. Stuckey admitted she was one of the owners of the cattle business. She asserted numerous claims, including forgery, against the bank and one of its employees who was also an owner of the cattle business. She further claimed she suffered damages when the bank employee took profits from the sale of cattle without her knowledge or permission. Because the only document which Mrs. Stuckey admitted had been signed by her did not include an arbitration provision, she disputed the matter was subject to arbitration.

The Supreme Court disagreed, concluding that it did not matter whether Mrs. Stuckey’s signature was forged and it did not matter that the deed of trust had no arbitration clause. The Court held since Mrs. Stuckey was a co-owner in the cattle business she was a third-party beneficiary to the loan agreements which included arbitration provisions. The Court also concluded that Mrs. Stuckey was equitably estopped from claiming she was not subject to arbitration on the basis that she could not claim breaches of duties associated with the loan documents and at the same time claim that she was not bound by the provisions in those documents.

This decision serves as a reminder of two principles: (1) You can’t have your cake and eat it too. The Mississippi Supreme Court recognizes and disfavors simultaneous attempts to claim the benefits of a contract and to disclaim application of certain contract provisions. (2) Arbitration continues to be favored by courts.

CAN I RELY ON MY SUBCONTRACTOR'S CERTIFICATE OF INSURANCE?

Every contractor generally requires proof of insurance from its subcontractors, especially with respect to worker’s compensation insurance. In satisfaction of this contractual requirement, subcontractors commonly provide a certificate of insurance to the prime contractor. Is the certificate of insurance sufficient? It may not be.

Many certificates of insurance contain a disclaimer that the certificate is for informational purposes only and does not extend the policy. The disclaimer is a warning that you must look at the policy itself for specific coverage.

In Complete Roofing Services, et al. v. Doherty Duggan & Rouse Insurors, 5th Circuit Court of Appeals (5th Cir. 2009), a certificate of insurance was issued to a general contractor, but the worker’s compensation coverage denoted in the certificate was limited to occurrences only in Georgia. The subcontractor’s employee was injured in Mississippi. The court determined that the "Georgia only" policy did not provide coverage for the injured employee. As a result, the general contractor’s worker’s compensation was required to cover the claim. In this case, it was a catastrophic claim costing the worker’s compensation carrier over $1,000,000.

The best business "policy" is to always obtain and read the actual insurance policy itself. In reviewing the policy, take into consideration the circumstances related to each particular project. For example, consider the following factors: Is the subcontractor from another state? If so, are the subcontractor’s employees from another state or local? Is the subcontractor’s insurance policy state specific? If so, does it cover the state where the project is located? Will any leased employees be used for the project? If so, does the insurance policy cover leased employees or is other insurance required? Are there any warnings or disclaimers in the policy? If so, take heed and consider whether other additional insurance is necessary.

Although the Complete Roofing Services case dealt with a contractor/subcontractor relationship, these basic rules apply to any situation where one party contractually requires insurance from another party. The bottom line is this: get the full policy and read it. This applies to your own insurance policy as well!

(D. Drew Malone is a member of Robinson, Biggs, Ingram, Solop & Farris, PLLC who practices in the area of insurance defense. Drew personally handled this case and contributed to drafting this blog.)

No Certificate of Responsibility = Null and Void Contract

On July 21, 2009, the Mississippi Court of Appeals made it clear that any contract entered into by a party with an unlicensed contractor is null and void. United Plumbing & Heating Company v. AmSouth Bank (Ct. App. No. 2007-CA-01194). This is the first reported decision that addresses the interpretation of Miss. Code Ann. § 31-3-15. This statute provides in pertinent part as follows:

No contract for public or private projects shall be issued or awarded to any contractor who did not have a current certificate of responsibility issued by said board [of contractors] at the time of submission of the bid…Any contract issued or awarded in violation of this section shall be null and void.

In United, the general contractor [United] entered into a contract with an owner [Wee Care] for the construction of a building. The contractor and its subcontractors were not paid for their work. The owner filed bankruptcy and the contractor filed suit against the lender [AmSouth] to recover its contract balance. AmSouth filed a motion for summary judgment arguing that because United did not have a valid certificate of responsibility, the contract was null and void. United argued that it did hold a certificate of responsibility, even though the certificate was issued in a classification different from the type of work being performed for Wee Care. The trial court granted summary judgment in favor of AmSouth. United appealed the decision but the Mississippi Court of Appeals affirmed the trial court’s ruling finding:

[T]he contract entered into between United and Wee Care was null and void because United failed to possess the appropriate certificate of responsibility for the type of work it undertook to perform. Having found that United’s contract with Wee Care was void, it follows that any contractual obligations AmSouth [the lender] may have owed [United or] the subcontractors are also void.

(emphasis added). If a contractor or subcontractor does not have a current certificate of responsibility, it may find itself in the position of having furnished labor and material on a project and not being paid. This could result in a financial disaster for one party and a windfall for the other party.

United makes it abundantly clear that owners, contractors and subcontractors should always check Mississippi State Board of Contractors to determine if the contractor or subcontractor holds a license for the work to be performed. It is also prudent for a party to confirm with the licensed entity that the qualifying party is currently an "owner, or a responsible managing employee, or a responsible managing officer, or a member of the executive staff…" See, Who Can be a "Qualifying Party" for a Contractor’s Certificate of Responsibility? Posted on this blog site by Christopher Solop, May 13, 2009.  (The State Board of Contractors has recently proposed an amendment to Rule L shortening the period to replace a qualifying party after the individual holding the certificate of responsibility leaves the employment of the company from 180 days to 90 days. This change will take effect on October 8, 2009.)

 

Arbitration Again - Is saying it once enough with multiple documents?

The Mississippi Court of Appeals just released yet another decision in its recent review of arbitration provisions. This time the case dealt with multiple documents, one of which did not include an arbitration provision.

The case involved a couple who had borrowed money from a bank. As is typical with loan transactions, numerous documents were signed as a part of the transaction. The loan-related documents contained an arbitration provision which included in part that "any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator". However, the deed of trust contained no arbitration provision.

The borrowers contended that their house and three acres were not included in the property that had been pledged under the deed of trust for the loan; the bank disagreed. The borrowers filed suit and the bank demanded arbitration. The borrowers claimed the deed of trust was not subject to arbitration.

On appeal, the Mississippi Court of Appeals ruled that the arbitration provisions in the loan documents "should be considered incorporated into the deed of trust" because "separate agreements executed contemporaneously by the same parties, for the same purposes, and as part of the same transaction, are to be construed together." Accordingly, the Mississippi Court of Appeals overturned the trial court and ordered arbitration of the matter.

The lesson of the decision is that some statements bear repeating. In this case, the Court concluded that the parties had agreed to arbitration, even though the deed of trust did not specifically so state. However, the result may not be the same in other situations. Although it may seem repetitious, the safest course of action is to include an arbitration provision in every document related to a transaction. Otherwise, you may find yourself fighting to enforce the agreement to arbitrate as the bank did in this case.

When is Enough, Enough - The "Shaken Faith Doctrine"

 

Contractors are occasionally confronted with a subcontractor that just cannot seem to get the job accomplished in a timely or satisfactory manner. Despite repeated warnings, the subcontractor’s performance may not improve. Because termination is an extreme remedy, contractors are generally hesitant to terminate a subcontractor. But when is enough, enough? The Court of Appeals for Mississippi provided some guidance on this issue in Byrd Brothers, LLC v. Herring, 861 So.2d 1070 (Miss. Ct. App. 2003).

In Byrd, the contractor retained a subcontractor to perform plumbing work on a condominium complex. Shortly after the plumbing work commenced there was a dispute concerning the scope of work to be performed by the plumbing subcontractor. There were also issues with the quality of the work performed by the plumbing subcontractor. The contractor repeatedly requested the plumbing subcontractor remedy the deficiencies. However, the plumbing subcontractor failed to adequately address the concerns complaining the contractor was "being too picky". When the contractor discovered billing irregularities, the plumbing subcontractor was asked to leave the project site. The contractor later requested the plumbing subcontractor meet to discuss his performance issues and completion of the project but the plumbing subcontractor refused unless the contractor immediately paid him some money. When this did not occur, the plumbing subcontractor refused to meet and did not to return to the project. The contractor retained another plumbing subcontractor to complete the work.

The original plumbing subcontractor sued the contractor for the subcontract balance and the contractor asserted a counterclaim against the plumbing subcontractor for the cost to complete the plumbing work. The trial court found in favor of the subcontractor. In reversing the trial court judgment and ordering a new trial, the Mississippi Court of Appeals articulated the following legal principle:

A party who has breached or failed to properly perform a contract has a responsibility and a right to cure the breach. The non-breaching party must give him a reasonable opportunity to cure the breach. However, the right to cure is not unlimited.

Where the breach is a material one, the non-breaching party has a right to end the contract, but in doing so he is also obligated to minimize his damages. Likewise, when the conduct of the breaching party has been of such a nature as to cause a loss of confidence or "shaken faith," the offended party is entitled to end the contract, but he remains responsible for mitigating damages.

 

(Citations omitted.)

The Byrd decision highlights the importance of providing a breaching party the opportunity to cure its breach. One warning may not be enough. Contractors need to be vigilant in their efforts to document incomplete and deficient performance and afford adequate opportunities for the subcontractor to "do the right thing". If the subcontractor fails to timely and satisfactorily respond to the contractor’s demands to cure the incomplete and/or deficient work, the cumulative impact of the incomplete and/or deficient work and the lack of responsiveness on the part of the subcontractor may result in a lack of confidence, i.e. "shaken faith", sufficient to entitle the contractor to complete the work and mitigate its damages.

Using the "Best Evidence" of Construction Damages is Required to Ensure Recovery

Mississippi law requires that a party introduce the "best evidence" available to prove its alleged damages.  The Mississippi Supreme Court has stated the basic rule of proof of damages as follows:

It is absolutely incumbent upon the party seeking to prove damages to offer into evidence the best evidence available [for] each and every item of damage.  If he has records available, they must be produced.  While certainty is not required, a party must produce the best that is available to him.

See Eastland v. Gregory, 530 So.2d 172, 174 (Miss. 1988) (emphasis added).

In applying this rule, the Mississippi Supreme Court held that evidence was insufficient where a party claimed that a buyer had breached its contract to buy a house and the owner had to sell to someone else at a lower price.  The "best evidence" of the sale at the lower price was not introduced because "no records were produced of the sale and event he name of the purchaser was not mentioned."  Id. at 173.  The Court indicated the kind of evidence that would have been "best", observing "[t]here was no contract of sale with the second purchaser offered into evidence, no check for purchase price, no deed, no record whatever, simply the statements by Mr. and Mrs. Gregory [the owner] that the house sold for $175,000.00."  Id. at 175.  The owner also claimed interest paid on a construction loan he had to take out in the amount of "about $4,300.00."  Id. at 174.  Even though a copy of a note was introduced into evidence, the Court ruled that the testimony was in error, stating:

In the first place there was no showing that the Eastland's breach of the contract in any way necessitated Mr. Gregory borrowing $85,000 to build his new home...  There may have been some damage occasioned by the breach of contract in addition to having to sell the residence for a less sum of money, but no predicate whatever was laid for such assessment by the jury.  A bare conclusory statement by Mr. Gregory that because of the Eastlands' breach he had to borrow the money hardly suffices.

Id. at 174 (emphasis added).  See also Caver v. Brown, 818 So.2d 376 (Ct. App. Miss. 2002) (citing Eastland); City of New Albany v. Barkley, 510 So.2d 805, 807 (Miss. 1987) ("while the measure of damages need not be perfect, the most accurate and reliable evidence available should be required.")

The rule is very straightforward and has been summed up precisely:

...[T]he highest degree of proof of which a case is susceptible must be produced.  This is the Mississippi rule...  What we rule here is that if basic fact records exist, those records, not opinions as to what they could have been, should form the evidentiary basis for introducing their content into this cause.

See Harrison v. Prather, 435 F. 2d 1168, 1175 (5th Cir. 1971) (emphasis added).

In addition, the Rule 1002 of the Mississippi Rules of Evidence provides that "[t]o prove the content of a writing, recording, or photograph, the original writing, recording, or photograph is required, except as otherwise provided by law."  This rule reflects the "best evidence rule."

 

Who Can be a "Qualifying Party" for a Contractor's Certificate of Responsibility?

To perform any public contract of at least $50,000 or private contract of at least $100,000, a contractor must hold a Certificate of Responsibility issued by the Mississippi State Board of Contractors.  It makes no difference whether the "contract" to be performed is a prime contract or subcontract at any tier.  Miss. Code Ann. 31-3-15.

Moverover, Mississippi law does not permit the "borrowing" of certificates of responsibility.  Only a responsible managing officer, employee, or member of the executive staff of the applicant for the certificate can serve as its qualifying party.  The statutes creating the State Board of Contractors, which governs the licensing of contractors, and that Board's regulations implementing those statutes are designed to prevent one person from serving as the qualifying party for entities in which he or she has not personal or managerial stake or responsibility.  To allow otherwise would dilute the requirements which are meant to ensure the integrity, financial capacity, and technical capability of all entities performing construction in Mississippi.

Miss. Code Ann. 31-3-1 defines a "certificate of responsibility" as a "certificate numbered held by a contractor issued by the board under the provisions of this chapter after the payment of the special privilege license tax..."

Miss. Code Ann. 31-3-13(a) defines who can be the "qualifying party" or an applicant of a certificate of responsibility, whether such application is for a new certificate or a renewal certificate.  Specifically, it states:

The board shall take applicants under consideration after having examined him or them and go thoroughly into the records and examinations, prior to granting any certificate of responsiblity.  If the applicant is an individual, examination may be taken by his personal appearance for examination or by the appearance for examination of one or more of his responsible managing employees; and if a co-partnership or corporation or any other combination or organization, by the examination of one or more of the responsible managing officers or memebers of the executive staff of the applicant's firm, according to its own designation.

The intent clearly is that a qualifying party be a responsible managing employee for or officer of the applicant, whether it's a sole proprietorship or corporation.  The true "responsibility" for which the certificate is issued cannot be determined otherwise.  In construing this requirement the State Board of Contractors promulgated the following regulation which, again, leaves no doubt that the "qualifying party" must be intimately involved in the management and/or ownership of the entity claiming him or her as their qualifying party.  Rule L states:

When the qualifying party terminates employement with the Certificate holder, the Mississippi State Board of Contractors must be notified in writing, by the qualifying party and the Certificate holder, within thirty (30) days of the disassociation and another party must qualify within one hundred eighty (180) days or Certificate holder will be subject to suspension or revocation of its Certificate of Responsibility.

(Emphasis added).

Thus, where a purposed "qualifying party" for Company A is neither a managerial employee nor an officer of that company but, in fact, owns or is the officer of another, unrelated Company B, but Company B routinely serves as a subcontractor to Company A, Company A and its purported "qualifying party" are in violation of MIssissippi law and the Rules and Regulations of the State Board of Contractors.  (This is typically done where owners of two companies do not want to commingle business assets, finances, or interests, but they do want to pursue and perform contracts together.)  Company A's Certificate of Responsibility is null and void as a matter of law.

 

Show Me The Money...Now!

In these difficult economic times, an Owner and/or Contractor may be tempted not to make full and final payment after the work is complete and there is beneficial use and occupancy of the facility. The Owner and/or Contractor may justify this conduct even though there is not currently a problem with the work because there "may" be unanticipated future problems with that will need to be addressed. However, withholding payment for potential defects or warranty issues could turn out not to be a wise decision.

An Owner and/or Contractor’s "belief" that it may have warranty claims sometime in the future may be insufficient to justify withholding of final payment as explained by the Mississippi Supreme Court in Crawford Commercial Constructors, Inc. v. Marine Industrial Residential Insulation, Inc., 437 So.2d 15 (Miss. 1983). In that case, a subcontractor sued the general contractor for payment under a roofing contract. The general contractor had refused to pay the subcontractor on the basis that it "believed the roof was improperly installed, so that [the general contractor] will ultimately be required to repair it to satisfy the building’s owner." Id. The Court ruled that the general contractor’s "beliefs" were conjectural. Id. at 16. In affirming the trial court’s decision in favor of the subcontractor, the Mississippi Supreme Court stated:

Under our authorities there must be a present, existent actionable title or interest which must be completed at the time the cause of action is filed. (citations omitted). A mere inchoate right is not sufficient and neither is a prospective danger of injury. (citations omitted)…"It is certainly an undisputable and invariable rule of law that a right of action must be complete when an action therefore is commenced…."…"we consider it to be the well-settled, general rule, that the facts which constitute the ground of a suit must exist at the time the suit is instituted…"

 

Id. at 16.

In addition to this jurisprudence, Mississippi has enacted what are generally known as "Prompt Payment Statutes" for both public and private construction contracts. Both of these statutes require timely final payment once the contract has been determined to be substantially complete or there has been beneficial use and occupancy. There are also "Late Payment Interest Statutes" which apply when a contractor fails to make payment "without reasonable cause" to its lower tier subcontractors or suppliers within fifteen (15) days after receipt of payment.

There is no provision for recovery of attorneys’ fees in either the "Prompt Payment Statutes" or the "Late Payment Interest Statutes." Contractors therefore need to ensure the issue of attorneys’ fees associated with collection efforts are adequately addressed in their contract documents.

You can expect this case law and these statutes to be cited frequently in payment disputes during these difficult economic times.