Archive for the ‘Construction News’ Category

NOLA Contractor’s College

On February 6, 2012 Author By Seth Smiley

On January 30, the New Orleans Mayor, Mitch Landrieu announced plans for what they are calling Contractor’s College. This cutting edge program will aid Disadvantaged Business Enterprises in becoming educated so as to allow them to compete in the market place with other more established construction companies.

Mayor Landrieu is quoted as saying:

“Contractor’s College is another great example of how we can build capacity among local businesses by removing obstacles that have prevented their inclusion in local opportunities in the past,”

“I am confident that this program will put DBE firms on equal footing with other companies as our City continues to recover and rebuild.”

The program is funded by a $1.042 mm grant from the federal Department of Housing and Urban Development. This is another step whereby the Landrieu administration has taken positive action to see to it that our business community is more competitive and fair. The Office of Supplier Diversity will oversee the allocation of the funding and run the Contractor’s College.

Those parties interested in participating in the Contractors College will need to fill out the Contractor Contact Form on the city’s website. From there you will receive further information on the program. Further information can be found at the city’s web-site or nola.com.

Posted in:     Construction News, Licensing, Louisiana  /  Tags: , ,   /   1 Comment

Sports and Construction – Lessons Learned

On January 17, 2012 Author By Seth Smiley

Growing up in South Louisiana, originally from Baton Rouge and now residing in New Orleans, I’ve had a really rough week being a sports fan. After LSU laid an egg in the BCS Championship game and the Saints came up seconds short in the NFL playoffs, I began to ponder, what can we learn from this? Being a construction law attorney, I wanted my clients and readers to learn form the mistakes and shortcomings of my favorite teams.

Some general themes we can take away from both losses are that the teams who are most prepared and execute the game plan the best will be the most successful. In both instances, LSU and the Saints did not execute and were not as prepared as their oppoinent. In the construciton world owners, general contractors, subcontractors and suppliers succeed when they are fully prepared for the project at hand and fully execute the company’s specific game plan for success.

IF LSU’s BCS PERFORMANCE WERE A CONTRACTOR IT WOULD NEVER GET PAID

LSU worked very hard all season to get into the big game. This paralles a budding company doing all it can to land that very promising bid for a substantial project. A contractor prepares for months and years to get that big once-in-a-lifetime project. When the big stage rolls around, the contractor needs to make sure, he/she does everything correctly so that they get paid and produce quality.

In LSU’s case this contractor would have not been successful in negotiating a quality contract that is mutually beneficial to each contracting party. They would not have filed all of the preliminary documents such as a notice of contract. This is a company that would have had numerous delays along the way, many of its own doing. During the course of the project this company would have not made any adjustments as the project went along continuing to further bury itself with no chance for success. When then end of the project rolled around, there would be no substantial competion filed, no adequate demand for payment, no lien filed or any other tool used to secure payment. This company would be last in line to get paid, and when its all said and done, the dream project would have been a disater, possibly putting this company in financial ruin. I encounter this type of company all the time and unfortunately, by time it gets to my desk, there is little or no hope of securing full and final payment.

IF THE SAINT’S PLAYOFF GAME WITH THE 49′ERS WERE A SUPPLIER IT WOULD FALL SHORT OF SUCCESS

The Saints on the otherhand had a game that played out just a bit differently. Had it not been for mistakes early on and poor late game defense, they too would have advanced and been in the NFC Championship game. This is analogous to many issues that suppliers have when trying to successfully obtain full payment at the conclusion of a job.

By the time I get a call from a supplier who is not being paid on a job, many of the typical right protection devices are no longer present due to the mistakes that suppliers have made early on. When supplies are delivered to a job, notice to the general contractor, hiring party and property owner need to be given to preserve lien rights. Also, suppliers need to make good practice of obtaining a personal guarantee from the contracting party. Further, suppliers need to set up an “open account” in the supply contract, which will statutorily preserve rights for attorney fees and costs. All of these precursor items can be set up in the begining and save a supplier lots of time, money, and stress at the end of a project.

When I finally get the call from the supplier to aid in collection efforts, we make a strong last minute charge to file a lien, send a demand letter asserting rights under open account, and file suit to protect these causes of action. Depending on the set of facts at that juncutre will determine our chances of success. In the case of the Saints, too many early mistakes and a shoddy prevent defense, led to their downfall. If this were a supplier then they would have gotten pennies on the dollar at best on this project, no matter the last minute heroic efforts.

WRAP UP

We need to look at the success and failures of others and learn from mistakes and good calls. There are lessons to be learned here. My teams will live to fight another day, but many companies do not. In these economic times an ounce of prevention is worth a pound of cure, to steal a medical analogy. Set up your game plan to do it right from the start and you will end up with success, unlike the teams noted above.

Posted in:     Collections, Construction Contracts, Construction News, Delays, Filing Requirements, Litigation, Louisiana  /  Tags: , , , , , , , , , ,   /   3 Comments

Louisiana Suppliers – Extra Notice Needed for Lien Rights

On January 4, 2012 Author By Seth Smiley

Over the past holiday season, I was at a Christmas party discussing with a friend of mine who runs an electrical supply company here in South Louisiana, the intricacies of notice provisions before a company like his can file a lien on a private project. Others party-goers probably thought our conversation boring, but we were intrigued. This conversation got me thinking that I should report to the supply world what my friend did not understand…

Here at the Wolfe Law Group we love liens. We file them for clients and recommend them to all others out there as a tool to preserve rights if, and often when, funds dry up and you are not paid on a construction project. Part of the privileged class under the Louisiana Private Works Act (La R.S. 9:4801 et al), are suppliers.

There are two types of suppliers protected under this act. Suppliers who lease equipment to contractors (“Lessors”) and suppliers who provide the materials to be used in the project (“Suppliers”).

EQUIPMENT RENTAL (see La R.S. Art. 9:4802(G)(1))

For Lessors, these companies need to deliver a copy of the lease agreement to the property owner and contractor within ten (10) days of when the leased equipment is delivered to the site. This notice is required as in most states to put all relevant parties on notice of potential future claims. So for companies who deliver equipment to job-sites as a rental, it is PARAMOUNT that you send out this notice so that you can file a valid lien after not getting paid. Then with your properly filed lien you can go after the party you have a lease agreement with and the property owner, general contractor and as a last resort you can foreclose on the property! Very strong rights indeed.

MATERIAL SUPPLIERS (see La R.S. Art. 9:4802(G)(2-3))

Next, for supply houses, such as plumbing materials, and electrical supplies – these companies also need to send out a notice to the property owner and the general contractor after delivery of goods. The Supplier needs to send notice of non-payment to the owner at least ten (10) days before filing a lien. Notice needs to be sent by certified mail return receipt and needs to have the name, address of the Supplier, description of materials provided, description of the property and the total amount owed, plus interest and fees. Also the Supplier needs to put the hiring party, general contractor and owner on notice of the items list above within seventy-five (75) days of the last month that the materials were delivered to the project via certified mail return receipt – or no later that then lien period. Strategically it may be best to send out one notice after the goods are delivered to all the parties above with the required information, just to preserve the right to file your lien.

These notice provisions can be tedious and if not followed to the letter of the law, will result in an invalid lien. The notice practice should become a staple in the administration of the aforementioned types of companies.  My office constantly invalidates liens that were not filed correctly. We also file a number of notices and liens which are filed correctly. General contractors and owners pay lien holders typically first because of the added security.

Bottom line – all of the successful rental and supply companies have these notice mechanisms in place. If you are a company who plans on competing in this arena, then following notice laws is always a smart plan.

Other resources on the topic: Zlien.com, reasestatelawyers.com, levy-law.com,

Posted in:     Construction News, Filing Requirements, Louisiana, Mechanics Lien  /  Tags: , , , , , , ,   /   Leave a comment

Litigation Topics for Prime / Subcontractor Contracts

On November 2, 2011 Author By Seth Smiley

I had a speaking engagement today here in Kenner, Louisiana (a suburb of New Orleans) whereby I had the pleasure of speaking to a group of contractors and architects regarding construction contracts. The bulk of the discussion focused on the most contested provisions within construction contracts.

The information is very helpful to contractors and can be used a resource when a contractor begins the contracting phase of a construction project to help get a better understanding of what is going on within the contract documents.

Prime/Subcontractors Contracts

Contracts between prime/general contractors and their subcontractors make up a vital link in the construction project chain. Here both parties need to negotiate terms to better protect when a dispute arises. A well crafted contract can better protect a prime and/or a sub when default arises. Typically subcontractors are at the mercy of the prime. A good subcontractor will have his attorney review any agreement to make sure that the deal is an even one.

AIA – American Institute of Architects is the most common standard form contracts in the construction industry. AIA contracts are a good starting point and offer contracts for Prime/sub relationships, Architect/owner, Owner/Prime, and any other design professional/contractor relationship that may exist.

• Commonly litigated subcontract provisions

There are a number of provisions which could be contained in a prime/subcontractor contract that need to raise a red flag when present and should be negotiated by either party so as to keep the contract from becoming one-sided.

1. Incorporation by Reference Clauses: (flow-up & flow-down provisions)

  • a Flow-down provision in a prime/sub contract will incorporate by reference terms and provisions of the owner/prime contract;
  • conversely, a Flow-up provision incorporates the duties owed by the owner to the prime into the prime/sub contract;
  • Many times parties enter into these agreements with out ever seeing the referenced document making them susceptible to unknown provisions;
  • Enforcement depends on the reciprocality of the provisions and lack of ambiguity

2. Scope of Work Provisions

  • Prime contractors want a broad scope of work provision with subs so that they can pin other work to them later on if needed;
  • Subs should demand very specific scope of work provisions so as to know exactly what work is expected and what exactly they have bid on;
  • This provision can incorporate other documents such as plans and specifications;
  • Provision needed for extra work or change order if work called for is outside of the scope;

3. Change Order and Extra Work Provisions

  • Very popular area for dispute in construction contracts – changes are always happening
  • There should be a clear provision in the contract outlining the process whereby CO’s are made and approved;
  • Define change order – modification to work already contemplated by the agreement; (ie different materials)
  • Define extra – item of work beyond the original scope of work that is added during construction;
  • MAKE SURE change orders and/or extras are in writing;

4. Notice Provisions

  • Found in various places within a prime/sub contract
  • Very important risk-shifiting devices – can determine a win or loss regarding a claim

5. Indemnity Clauses

  • Typically these trickle down the line Owner -> Prime -> Sub
  • These are generally enforceable, Subs should be careful and not allow indemnity for negligence of another party
  • Insurance can be purchased by prime or sub to cover the indemnity obligation

6. No Damages for Delay Clauses

  • Owners and Primes try to insert “no damage for delay” provisions in contracts for protection against unforeseen delays
  • Parties want to check all referencing documents to see if this provision is in there

7. LD’s – Liquidated Damages Provisions

  • Very helpful provisions because the pre-determine delay damages, usually on a per day basis;
  • Enforceable unless determined to be a penalty or if they are a “one- size fits all” provision;
  • LD’s are a good way to measure delay damage but can enhance the need for Contractor/Sub to accelerate work to avoid further damage, leading to defects and workmanship issues;
  • For LD’s to apply the contractors work must be a substantial factor in the delay;

8. Lien Waivers

  • reduce the chance for encumbrances to be placed on the title of the property;
  • Usually not enforceable if lien waiver required before work performed;
  • A good tool for Prime and Owner to reduce exposure;
  • Can be used in an incremental fashion as payments are distributed

9. “Pay-when-paid” v. “Pay-if-paid”

  • Pay-if-paid is defined as a subcontractor gets paid by the general contractor only if the owner pays the general contractor for that subcontractor’s work.” Requires a condition precedent.
  • Pay-when-paid in contrast to the pay-if-paid; a pay-when-paid clause does not establish a condition precedent, but merely creates a timing mechanism for the general contractor’s payment to the subcontractor.

10. Retainage

  • Typically 5%-10% of each payment will be withheld by the Owner/Prime until a later date, such as substantial completion
  • Its purpose is to keep a pool of money to remedy any defects in workmanship by that sub

11. Termination provisions

  • Termination for Cause
  • Usually nonpayment, excessive delay, insolvency, or convenience are reasons to terminate the contract

12. ADR Clause (Arbitration/Mediation clauses)

  • Arbitration (most popular) – binding way to avoid litigation;
  • Mediation – non-binding way to avoid litigation;
  • Both can be effective, typically arbitration can be more intimidating due to its binding and no (very limited) ability to appeal

13. Attorney fee provisions

  • Very popular as no one likes to pay an attorney!
  • Many provisions will say that the unsuccessful party must pay attorney fees but others to be careful will put the burden on one party
  • Primes and subs should include an attorney fee provision in all contracts
  • Good to be specific on the provision and include for litigation and ADR

14. Forum selection & choice of law

  • If working out of state, make sure you know which venue a dispute will be held in;
  • This can be a very costly provision

(list partially obtained from the ABA’s Fundamentals of Construction Law)

 

Posted in:     Arbitration & ADR, Change Orders, Construction Contracts, Construction News, Damages, Delays, Dispute A Lien, Disputes, Insurance, Litigation, Louisiana, Mechanics Lien  /  Tags: , , , , ,   /   1 Comment

Tropical Storm Lee – Prepare for Insurance Claims

On September 4, 2011 Author By Seth Smiley

Contractors and property owners should be very knowledgable of the claims process after a natural disaster. Over the Labor Day weekend the New Orleans metro area, along with southern Louisiana experienced high winds and double-digit rainfall totals due to Tropical Storm Lee.

Contractors who have equipment, property and unfinished work need to report any flood, wind or wind driven rain damage to your general liability insurer in a timely fashion so that you may collect reimbursement for damages sustained from this storm. Your insurer will assign a claims specialist to assess the damage and this person is who you will work with to obtain reimbursement. Be sure to read the policy to make sure you follow all the specific guidelines, otherwise your insurer may use this against you as an excuse not to timely pay up on the claim.

Homeowners in south Louisiana should be well versed in the drill of making claims against your homeowners insurance. This, too is a situation whereby you must read the policy to make sure you follow the set guidelines and timely file a proof of loss. If the insurance company does not value your damage to a level where you are satisfied, then you may want to hire a public/private adjuster by searching the Louisiana Dept of Insurance – Public Adjusters search or reaching out to an reputable firm such as Louisiana Adjusters. The final step is to hire an attorney to escalate your claim.

Due to Hurricanes Katrina and Gustav, firms like the Wolfe Law Group have valuable experience with handling these matters. The mere hiring of an attorney will escalate your claim to another level within the insurance hierarchy and depending on your claim, it may render more effective results.

Remember that you typically have 60 days to file a satisfactory proof of loss and you have one year to file suit against the insurer, both from the date of the loss.  It is important to take photographs and video if possible before clean up to maintain evidence of your loss. Another important tip is to keep good records of invoices and receipts of all work performed on your repair. The insured (contractor or property owner) has a duty to mitigate its damages, so do what you can to prevent damage from getting worse once the storm has passed.

Remember to consult with an attorney or your insurance agent when reviewing the terms of your policy. The policy is the set of rules by which you and the insurer operate when making claims. Do not fight for your claim alone against your insurance company, hire an an attorney who can help you navigate the claim as well as the reconstruction of your property in an efficient manner. Whether you are a contractor or a property owner, contact Seth Smiley with the Wolfe Law Group to discuss your Tropical Storm Lee claims so that you get the results you deserve.

Posted in:     Collections, Construction News, Damages, Insurance, Litigation  /  Tags: , , , , , , , , , , , , , ,   /   Leave a comment
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