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.

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,

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)

Last year, we had a lot of fun with the Wolfe Law Group / Zlien fantasy football league. Actually, it was so successful we had to open two leagues. Folks have been asking whether we’d have a league set for up 2011, and we’re happy to announce that we are, and the league is now open for registration.

Register early, because we’ll likely fill up. You can view our league and sign up at the following link:

http://football.fantasysports.yahoo.com/league/wolfelaw_zlien

To join our league on Yahoo! Fantasy Sports, you’ll need the League ID (634669) and password (WZ2011).

We’ll conduct a live draft, which is currently scheduled the evening of Wednesday, August 31, 2011, at 7:15 CST, 5:15 PST.

California has over 300,000 licensed contractors, all of which had to be licensed through the state licensing board. Many contractors do not know all the resources which this arm of the Department of Consumer Affairs makes available to contractors and the public. Some of the more popular features include:

• Checking application status for contractors who’ve applied;
• Download a wealth of forms or applications;
• File a contractor complaint, online;
• CSLB’s most wanted unlicensed contractors;
• E-mail alerts;

For the consumer there are tutorials on hiring a licensed contractor, knowing the risks of being an owner/builder, filing complaints, legal issues for construction consumers. California CSLB is also very proud of its SWIFT program. SWIFT stands for Statewide Investigative Fraud Team, where the government performs sting operations to catch unlicensed contractors. This team plays the double roll of protecting the consumers from unlicensed contractors, but it also protects those contractors who are playing by the rules from having business stolen from them by their unlicensed counterparts.

For contractors there are links to leading industry bulletins, the very helpful “Contractors Guide to Licensing” which after taking a look is very informative for all contractors, big or small, in educating them on the licensing process. There are also other links regarding out-of-state contractors obtaining reciprocity.

The hearty list of online services offered by CSLB includes, checking on a license, filing a complaint, the full database of all licensed contractors, processing times, searches for surety bond companies and workers comp insurance companies.

I found that the email alerts are very helpful on keeping up with current events and breaking news. Much of the news thus far has been updates on unlicensed contractors who have been caught by the SWIFT program.

As always seek the advice of legal counsel when contemplating licensing, contracting, and negotiating. The California Contractors State Licensing Board has a very top notch site dedicated to aid both the consumer and its professional contractors. This resource should not be overlooked when deciding to get your license or maintaining it. The attorneys at Wolfe Law Group, LLC are experienced in all areas of construction law including contractor licensing.

What can we say, being from New Orleans with the Saints as the reigning champions has us all excited about the 2010 NFL Football Season. That’s why we’ve gotten together with our friends at Zlien and set up an NFL Fantasy Football League through Yahoo!

And we’re inviting participation from our clients, colleagues, readers and friends. To sign up, just click on this link and set up your team. You will need to know the password, and the password is “construction.”

I must warn you….the Wolfe Law Group staff not only knows the law, we know football. So be prepared to lose.

We’re now in our 5th year of blogging about construction law issues that matter to contractors, subcontractors and suppliers across the country…and all of our postings and tagging has transformed the Monitor into a leading construction law resource.

To celebrate the milestone, we’ve made things even better.

First, we’ve simplified our design.   Posts on the left, topics on the right, and a search bar at the top.   We’ve even gone through the site and re-tagged and re-categorized each post to make it more intuitive for folks to find posts on-topic.

Second – and we’re most excited about this – we’ve added a Resources Page with free construction law resources.   Highlights of the free Resoucres include:

• Construction Law Blog Directory.   This is the only directory of construction law focused blogs on the web.  We list them all outright, but also sort and organize the blogs by state and topic (green building v. chinese drywall, for example).   Something missing?   You can add your link to our directory by filling out the form at the bottom of the directory’s page.
• Avvo Legal Guides and Answers.    Wolfe Law Group participates in the legal Q&A forum and publication of legal guides at the lawyer-rating website, Avvo.com.   We stream those answers and guides to you on the Monitor.
• Free Forms and Documents.   Powered by JD Supra, we provide visitors with free forms, legal pleadings, and other types of documents.
• Webinars.   Our webinars and construction law presentations, powered by SlideShare.

Third (and finally), we’ve brought back three Special Feature category of posts:  (1) About our Services; (2) Around the Web; and (3) From the Experts.

We’ll build upon the Resources page as time goes by, and continue posting about important  construction law issues.   You can subscribe the the Monitor by RSS Feed, by following us on Twitter, or liking us on Facebook.

Here is the definition:

A method of paying a lawyer for legal representation by which, instead of an hourly or per job fee, the lawyer receives a percentage of the money her client obtains after settling or winning a case.  Often contingency fee agreements award the successful lawyer between 20% and 50% of the amount recovered [read definition on wikipedia].

In plain english, you attorney works on a “contingent” basis, meaning the attorney’s payment is dependent on the outcome of the case.  If you recover money, the attorney gets a percentage of the recovery.  If nothing is recovered, you pay nothing in fees.

What’s Good About Contingency Fees?

For the client, contingency fees have many positives.

The cash-flow impact of litigation is substantially lower, you gain leverage over the other party who needs cash flow to fund the case, and a portion of the case’s risk is transferred and borne by your attorney.

The only “negative” of a contingency fee is that the fee can be substantial. When a recovery is made, the attorney fee is usually between 30-45% of the amount recovered. But, as we’re about to explain, this really isn’t as bad as it sounds.

100% of Nothing is Nothing

For the client, contingency fees have many positives.

The cash-flow impact of litigation is substantially lower, you gain leverage over the other party who needs cash flow to fund the case, and a portion of the case’s risk is transferred and borne by your attorney.

The only “negative” of a contingency fee is that the fee can be substantial. When a recovery is made, the attorney fee is usually between 30-45% of the amount recovered. But, as we’re about to explain, this really isn’t as bad as it sounds.

WLG Loves Contingency Fees

We love representing clients on a contingent fee basis for one very important reason: We can more zealously represent our clients.

When clients are billed for fees, it’s inevitable that bills will be challenged and cash crunches will arise. This effects how our firm can represent a client.

If $10,000 in discovery motions are needed, for example, but the client can’t afford it, the client’s claim is weakened.

Contingency fees result in more aggressive litigation…which results in higher settlements and more successful trials.

How to File a Construction Lien in Oregon

How to File a Construction Lien in Louisiana

These two legal guides offer plain english explanations on how to prepare and file a construction lien in either of these states.

The two above-listed legal guides were written and published by Scott Wolfe Jr., the founding attorney of Wolfe Law Group.  He previously published a similar legal article on Avvo.com about filing construction liens in Washington, which you can read here.

Indeed, many have suggested that the cost of building green (especially gaining LEED certification) is significantly higher than building to ordinary standards.   Others argue that LEED certification can be achieved through an everyday budget.

Regardless of where you fall on this issue, everyone should agree that green building projects have certain specifications, and bidding contractors must project the construction costs responsibly.

And so, one of the most challenging components of a constructing a green building may be the process of bidding it.

Since green building work is just starting to take hold in the construction industry, many contractors and subcontractors are working on little-to-no experience on green projects.   And sometimes the data behind green building techniques and products are thin (see greenwashing).

On Wolfe Law Group’s Construction Law Monitor, we published a 2-part article on the Bidding Process and Change Orders:   Bidding Errors and Change Orders: Avoiding a Nightmare [Part One and Part Two].

How do we suggest you avoid Bidding Error nightmares?   Spend time with the Contract Documents pre-bid.

With green building projects, this is more true than usual.

When preparing your green bid, here are some example thoughts that should be considered:

• If the project is being certified with LEED or another standard, who will be responsible for the submittal process?   Who will be responsible for monitoring the construction process?
• Contact vendors who will be providing the project’s materials, and review the data they have to back-up their performance and environmental claims.   It would be a pity to plan on using one product, and being forced to later use a more expensive substitute.   See this article on how to shop for green building materials.
• If the builder is anticipating a tax credit, do you understand the requirements to qualify for the credit?   Will this increase your construction costs?

A successful green building project starts where successful ordinary projects begin:  during the bidding and contracting period.

Whether your green building project will increase costs, or not, understand the green building expenses associated with your project, and avoid bidding errors and change order nightmares.

This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Green Building Law Blog.