Archive for the ‘Construction Contracts’ Category

Missed Your Lien Deadline – What Now?

On May 3, 2013 Author By Sean Sullivan
Missed Your Lien Deadline – What Now?

True:  deadlines dictate when it comes to securing your lien rights.

False: missing a deadline precludes you from ever recovering the money you are owed.

In the construction world, there is no doubt that the deadlines for securing your lien rights are rigid and unforgiving. If you have not filed your lien by the applicable date, you have relinquished that right permanently. This should not be interpreted, though, as having lost your ability to ever collect the money that is owed to you or your company. There is still a way!

Liens Are One (Important) Part of a Bigger Picture

There is no overstating the significance of the mechanic’s lien. It is the most efficient way of making sure that you are paid for the work performed or materials supplied on a project. It allows you to hold all parties accountable and is a very effective way of securing due payment. Understandably, there are strict guidelines that control how this right can be maintained and enforced. Sometimes, these guidelines are not met and the lien option is no longer viable. All is not lost, however.

If the enforcement of a lien were the only way a contractor or subcontractor could recover from another party, there would be a great many unhappy contractors or subcontractors! Thankfully, petitioning a court to enforce one’s lien is usually just one of many bases for recovery.

The most important piece(s) of paper that you will have in your possession during and after a project is your contract. We’ve discussed in multiple posts the importance of your contract and provisions that should be included in them. Your contract is your law, and it is law that you get to write. When an owner fails to pay for the work performed by the contractor (or contractor to the subcontractor), they have broken the law, and courts do not look favorably upon those who break the law. If your contract is clearly expressed and signed by both parties, then any breach of that contract will allow the other party to recover, regardless of any lien in place.

Maybe the court determines that there is no “contract” in place, though. What then? Again, all is not lost. Still looking at the bigger picture, there is the chance the court will find that an open account exists. What is that? According to La. R.S. 9:2781, an open account “includes any account for which a part or all of the balance is past due, whether or not the account reflects one or more transactions and whether or not at the time of contracting the parties expected future transactions.” So, if you’ve performed the work and haven’t been paid, even if you don’t have a lien, you can still recover on this principle.

The “Back Door Lien”

Once in a blue moon you’ll come across a situation where you have missed your deadline to file a lien, but circumstances are such that a potentially even more powerful remedy is available to you: attaching property. Don’t get me wrong – the planets need to align fairly nicely for this to happen, but it is something that came up recently and is worth mentioning.

A client recently came to me seeking to have a lien placed on property. However, the work had been completed several months prior, so the lien deadline had passed. As usual, I began looking into the above claims, and others. This client, though, was particularly concerned because the debtor was preparing to dispose of the property in one manner or another. A lien on the property would have prevented that from happening, but this was not an option. Instead, Louisiana Code of Civil Procedure article 3541 could be utilized and, along with the filing of the above and similar claims (breach of contact, open account), you could also request a writ of attachment. In the simplest terms, when this writ is granted, the property (or the person depending on the situation) is seized, thus preventing the debtor from disposing of it to avoid payment of the debt. It’s a costly method of recovering money owed, but one that rather severely drives home the point that in this state, neglecting your obligations is seriously frowned upon and comes with consequences just as serious.

 

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Posted in:     Construction Contracts, Construction News, Litigation, Louisiana  /  Tags: , , ,   /   1 Comment

Louisiana Contractors – Workers Compensation Insurance

On December 27, 2012 Author By Seth Smiley

Back in 2009 this blog reported on the very topic of Workers Compensation insurance, stating that 1 and 5 businesses are breaking workers compensation laws. In my everyday practice, I feel like the trend is still prevalent in the construction industry. The main reason being is due to the exorbitant price of this insurance on contractors.

Workers Compensation is codified in Louisiana under Revised Statute 23:1021 et seq. There are a myriad of rules and definitions within this chapter of the code that would make any contractors head spin. There are a few key items to remember when classifying employees. First and foremost is that there is a presumption of employee status, as seen in La. R.S. 23:1044. This can be overcome by a number of factors which would make the worker, an independent contrator rather than a employee. La R.S. 23:1045 is where the law states that independent contractors and subcontractors are exempt from coverage. Although the price to insure all employees under workers comp insurance is high, the price that is paid if an accident happens to an uninsured worker is much higher. Furthermore, when the insuring companies do an audit at the end of the year of the status, there can be a hefty price tag for improper reporting.

I represent a number of clients who are learning the hard way that companies like LWCC and Louisiana Home Builders Association are not fun to litigate against for a contractor trying to make profits. These companies have either in-house attorneys or law firms who handle these cases day in and day out. There is almost no incentive for them to settle claims because there is no fear of pricey litigation. As for the contractor, attorney fee bills keep going higher and at the end of the day the contractor can pay double and triple of what they would have if they had properly reported or settled early.

So let this be a warning to all contractors who are trying to push the line when it comes to workers compensation insurance, its just not worth it. Just like fighting any insurance company, even if the insurer is wrong, they will fight to the bitter end to be proven so. Taking an early haircut, so that you can get back to making money in the industry, can be a win-win for your construction company.

Posted in:     Construction Contracts, Construction News, Disputes, Insurance, Labor Law, Litigation, Louisiana, Payment Requirements  /  Tags: , , , , , , ,   /   Leave a comment

California Legislature Further Helping Subcontractors

On August 24, 2012 Author By Seth Smiley

I recently found a good article on JDSupra.com, always a great source for solid legal content, regarding California Senate Bill 474. This Bill protects subcontractors when contracting so that they cannot be held liable to indemnify the general contractor or owner from certain types of negligence. Author, Maria Giardina of Sedgwick, LLP, does a very good job of explaining the step that the California Legislature has taken to further protect the interest of subcontractors who often enter into one-sided contacts with general contractors in order to procure work in this troublesome economy.

This Bill raises a bigger and more overarching question as to why do state legislatures feel the need to make rules to restrict the freedom to contract. The legislature here is essentially trying to protect the subcontractor from itself. In a perfect world, general contract presents the subcontract document to the subcontractor, and that sub has its lawyer review the contract to see if the terms can be negotiated so that its a fair document for all involved. This new Bill, allows for subs to enter into subcontract agreements with general contractors and then after-the-fact afford the sub protections because the general contractor had a well written contract.

William M. Hill and Mary-Beth McCormack author a well written article on protecting a subcontractor from itself. This article deals with a hot construction law topic, pay-when-paid vs. pay-if-paid clauses.

It seems from the face of California Senate Bill 474 and many others like it across the country, that we are on a path toward heavy government regulation of our business relations. I understand that the little man needs protection from corporate might, but I believe that we have gone too far. Let the parties contract to whatever they want. If it goes against public policy, then the provision is void on its face. There is no need to waste taxpayer money to draft, argue, and pass bills such as these.

For more on this topic, see Gordon & Reese, LLP article and Senator Noreen Evans.

Posted in:     California, Construction Contracts, Construction News, Insurance, Litigation  /  Tags: , , , , , , , , , ,   /   Leave a comment

Louisiana Arbitration Law

On May 30, 2012 Author By Seth Smiley

Over the past few months here at Wolfe Law Group, I’ve been involved in a number of disputes where where arbitration clauses were invoked and the matters traveled the path of arbitration rather than ordinary judicial proceeding. Mediation and Arbitration have been touted as the faster, cheaper and more efficient way to handle legal disputes. While this may be true due to the enormous built in delays and catastrophic costs of “going to trial” there are a number of ways that contractors can be disadvantaged by dealing with lawyers who are not experienced with this process.

First and foremost, there is no standard for the rules. This means that, unlike the slow judicial process, the rules by which each arbitration play by can be changed and altered based on the contracts between the parties and document that they incorporate. For example, the American Arbitration Association (AAA) is one of the leaders in construction arbitration. They publish a set of rules called “Construction Industry Arbitration Rules and Mediation Procedures.” These rules are the rules that govern the entire proceeding. What this means is that there is a completely different set of operations for an arbitration than there would be for a judicial proceeding. As all lawyers know and most laymen do not, procedural tactics and expertise can make or break a case, even before it gets to be heard on the merits.

The key to getting this set of rules to apply is by having a good unambiguous arbitration clause in your construction contract. The AAA even gives example clauses that a construction company can use in its construction contract:

“Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Construction Industry Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.” See AAA’s Guide to Drafting Dispute Resolution Clauses for Construction Contracts 

On of the more important aspects of the quote above it that it incorporates the AAA Construction Industry Arbitration Rules. The same can be said for just about any arbitration company, but the AAA tends to be the leader in the commercial and construction industry. Further, you can even go as far as having a local company such as ADR, Inc., host the arbitration and then the AAA rules will apply to that proceeding.

Another reason why this is important this that the law in Louisiana governing arbitration proceedings is relatively short and references other parts of the Civil Code and the Code of Civil Procedure. Louisiana Civil Code in its Revised Statutes §9:4201 – §9:4217 encompass Louisiana Arbitration Law. These statutory provisions are helpful in filling in the gaps where other rules fall short and that point to other areas of Louisiana law that govern arbitration proceedings.

Typically the process works like this: 1) first you look to the contract to see how the parties have agreed to have the matter arbitrated, such as a clause saying that arbitration is proper and which rules apply. 2) Then you see which rules apply (if any) and then that will be the governing set of rules for the proceeding. 3) In matters where the rules are silent, then parties are forced to look to the Louisiana Arbitration Law section of the Revised Statutes as gap filler. 4) Finally, if all areas are silent, then you seek a decision form the arbitrator for what to do or how to proceed based on public policy.

Knowing the rules is critical to the success of an arbitration or any type of legal proceeding. The term “the devil in the details” cannot be more applicable. Arbitration proceedings can save a company thousands of dollars and lots of time. The one negative is that the are final and cannot be appealed, save extreme circumstances.  Always consult with an attorney before deciding to insert an arbitration clause into your construction contract and if you decide to invoke it.

Posted in:     About Our Services, Arbitration & ADR, Construction Contracts, Construction News, Litigation, Louisiana  /  Tags: , , , , , , , , , , , ,   /   1 Comment

Can Construction Estimating Software Help You Win Bids?

On May 7, 2012 Author By Seth Smiley

Here at ConstructionLawMonitor.com, I often get industry experts who would like my readers to hear their opinions or help spread the word on what is going on in the construction industry. Software Adviceis a company who helps those in selected industries choose the best software for the business. Statistics are always a great way to show if what you are doing is correct and who all it is affecting. Below is a write up from Derek Singleton at Software Advice regarding its Construction Estimating survey. The idea of estimating is to win bids at a price that will make money for the construction company. Software Advice surveyed the industry and their findings are indicated below:

Guest Post: Derek Singleton, ERP Analyst, Software Advice

“At Software Advice, we spend a lot of time reviewing construction software of every variety. While we’re well-versed in the promised benefits of various systems, we’re always interested to know whether those benefits are realized by companies. Toward that end, we decided to survey the construction estimating industry to find out whether estimating software actually helps companies win bids.

To get responses, we enlisted the help of everyone from construction bloggers to LinkedIn group admins and construction associations. Ultimately, we came up with a set of benchmark findings that will allow estimators to compare themselves against industry standards.

More than 100 companies responded to the survey and shared their thoughts on how to effectively estimate. The companies that responded to the survey represent a variety of trades and company sizes.

While the types and sizes of construction companies participating in the survey varied, there were a few commonalities between companies and how they estimated their jobs. For instance, while the jury is still out as to whether spreadsheets are a good method of estimating, a majority of companies that use an estimating system found that the software helped them perform better estimates.

Of course, as one participant noted, it’s possible that the people who use estimating software are more meticulous in their data entry by nature. However the strong correlation between estimating software and effectiveness suggests that having an automated system at hand improves your ability to estimate.

There were also some interesting findings about how accurate your estimating data is and the method used. As an example, participants that use an estimating program reported that they underbid projects only 5 percent of the time. Meanwhile, companies that rely on spreadsheets report that they underbid roughly 15 percent of the time.

If you’re interested in finding out more about the results of our survey, please visit our website where we are hosting the results at: 2012 ConstructionEstimatingBenchmarkReport.

It’d be great if you can share your thoughts on whether these findings match your own experience as well. Also, if you have a tip to offer others in the industry, please share that as well.”

Posted in:     Bidding, California, Construction Contracts, Louisiana, Oregon, Washington  /  Tags: , , , , , , , , , , , ,   /   1 Comment
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