Construction and Engineering Lawyers & Attorneys : K&L Gates Law Firm : Financing, Development, Dispute Resolution, Government Contracting

Pittsburgh partner Jason Richey recently teamed up with associate Bill Wickard to write “Consequential Damages in Today’s Construction Industry,” which appears in the May 5, 2008 issue of Constructioneer.

In the article, Jason and Bill stress the importance of project-specific consequential damages waivers, noting that f ailure to include such a waiver can leave construction managers open to costly lawsuits.  Waivers should be both "project-specific" (anticipating the potential types of damages that could arise with a certain project) and mutual (the list of damages should be the same for the owner and contractor).

Jason and Bill point to Perini Corp. v. Greater Bay Hotel & Casino to illustrate the importance of these waivers.  In the Perini case, the construction manager responsible for the renovation of the Sands, an Atlantic City, N.J. hotel and casino, produced his façade for the building four months late.  The original contract did not include a damages waiver and the Sands argued that their lost profits were due to the lateness of the façade.  An arbitration panel awarded the Sands $14.5 million in damages, nearly 24 times the contract fee.

To read the full article, please click here (posted with permission).

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N. Plainfield Bd. of Educ. v. Zurich Am. Ins. Co., 2008 WL 2074013 (D.N.J. May 15, 2008)

In this case, the Board of Education had been sued by various contractors and subcontractors for breach of contract and various tort claims, and sought specific performance from Zurich American Insurance Co. to defend against the claims under their insurance policy.  Zurich denied coverage, citing the policy provision excluding from coverage all claims arising from breach of contract.  The court found that that this exclusion covered any action that alleged a breach of duty, neglect, error, misstatement or omission and that grew out of or had substantial nexus with breach of contract, or any injury that would not have occurred but for the contract breach.  Thus, Zurich was justified in refusing coverage and indemnity for those claims, and the court granted Zurich’s motion for summary judgment against the Board.

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Titan Stone, Tile & Masonry, Inc. v. Hunt Constr. Group, Inc., 2008 WL 2038857 (D.N.J. May 12, 2008)

In this case, the court ruled on a motion for reconsideration of a finding that a subcontractor who defaulted on performance, but not the surety, was responsible for the attorneys fees of the general contractor, Hunt Construction Group.  The court applied the principle that a surety can be held liable only in accordance with the strict terms of its undertaking, and found that the surety bond in this case did not specifically provide for reimbursement of attorneys fees.  Hunt argued that the obligations of Titan under the performance bond should be coextensive with those of Titan under the agreement.  The court rejected this argument as inconsistent with the purpose of a performance bond, which is to provide the general contractor with the funds to complete the project upon the default of the subcontractor, not to make the general contractor whole.

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Great West Contractors, Inc. v. WSS Ind. Constr., Inc., 162 Cal. App. 4th 581 (2008)

WSS Industrial Construction, a steel subcontractor, sued general contractor Great West Contractors, to recover for work performed on a public works project in Riverside, California.  At the time that WSS submitted its bid proposal to Great West, WSS had applied for but not yet obtained a corporate contractor’s license.  WSS did receive a license after the bid was accepted, but only after it had already ordered multiple sets of shop drawings and some of the material necessary for the project.  WSS initiated the lawsuit by suing Great West and its surety, Fidelity and Deposit Company of Maryland, for $91,000 due under the contract and subsequent change orders.

At trial, Great West and Fidelity moved for a nonsuit on the grounds that WSS was statutorily barred, pursuant to Business and Professions Code section 7031, from any recovery because WSS was not duly licensed at all times during performance of the contract.  The trial court determined that WSS’s president had held valid individual licenses at all times and that, in any event, WSS was not required to have a license for the work that it performed prior to receiving its license.  The court held that “there was substantial compliance with the licensing during the contract and work was performed in good faith.”  The jury awarded WSS $220,000 in damages, including statutory penalties and interest.  Great West and Fidelity appealed after the court rejected their post-trial motions for a new trial, vacation of judgment and judgment notwithstanding the verdict. Continue Reading...

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Cubitt Bldg. & Interiors Ltd. v. Richardson Roofing (Ind.) Ltd., [2008] EWHC 1020 (Queen’s Bench Div., Tech. & Constr. Ct.)

Cubitt, the contractor on a construction project in London, engaged Richardson as sub-contractor.  Under the relevant sub-contract, both parties had a discretion to refer disputes to adjudication.  Richardson completed its works, Cubitt alleged delay and indicated that it intended to deduct liquidated damages from the amount payable to Richardson.  Richardson started arbitration proceedings against the Cubitt.  Cubitt sought a stay of the arbitration so that it could refer the dispute to adjudication. Continue Reading...

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