Pick up a contract for any good-sized commercial or industrial project and you’ll be holding 50 to 100 pages. I’ve never seen a contract for a significant public works project shorter than 50 pages. Even the most popular A.I.A. model contract (A201) is 40 pages.
Craftsman Book Company
You’ll see the words “defend, indemnify and hold harmless” in many construction contracts. That’s an indemnity clause – and it can be toxic for contractors. I’ll explain.
One common form of indemnity gives an owner or a designer the right to recover from a contractor for every loss on the job, even losses caused 100% by the owner or a designer. Is it fair to make a contractor cover losses like that?
Mike and Cheryl Ording had a leaky basement in their Milwaukee home. A salesman for Everdry Waterproofing offered to solve the problem. According to the Ordings, the salesman claimed they “would never have water in their basement again” if Everdry did the waterproofing. Reassured, the Ordings signed the contract. A few weeks after work was done, the Ordings noticed water in their basement. They called Everdry. Before Everdry showed up, a storm flooded the basement five feet deep. Everdry offered to lend the Ordings a pump but insisted that any damage was not their problem. The Ordings sued.
A fire on September 7, 2009 did serious damage to the home of David and Carol Butler. The Butlers selected Purofirst of Milwaukee to do the repair work and signed an "Authorization" form provided by Purofirst. The Butlers moved out and Purofirst went to work. Six months later, work was done and the Butlers moved back in. Purofirst suggested writing up a punch list of any defects the Butlers found. Purofirst fixed some items on the Butlers' punch list but insisted others were not their problem. The Butlers didn’t like that. They refused to make the final payment. Purofirst filed suit to collect.
Subs and suppliers expect to be paid on time. That’s a problem when an owner is slow to pay the prime contractor. So what are you supposed to do about slow-pay? The obvious answer is a “pay-if-paid” clause in your subcontracts. With “pay-if-paid,” a prime contractor doesn’t have to pay subs until paid by the owner. That’s legal in about half of all states. If you’ve never used a “pay-if-paid” contract clause, keep reading. There’s a lot to learn.
Seventeen states have made changes to their construction contract law in the last few months. My partial list is below. Some of these changes are trivial. Others will affect contractors throughout the state. Don’t expect to find much on this list that makes your life easier. That’s not how it works. Most changes in the law make it harder for contractors to earn a living.
I like arbitration. Contractors tend to get a fair shake when they arbitrate disputes. Arbitration is usually faster and cheaper than a lawsuit. Another advantage: Most construction disputes are questions of fact, not law. You need an arbitrator with common sense, not a judge and two attorneys with law degrees. Maybe the best reason to arbitrate: It puts the owner’s attorney at a disadvantage: Your dispute isn’t going to court. Threatening to sue is pure hot air. If your construction contract requires arbitration, no court will hear the dispute.
Home improvement projects in Pennsylvania got more complex last month. I’ll explain what changed. But first, a little background.
Pennsylvania’s Home Improvement Consumer Protection Act (HICPA) became law on July 1, 2009. The law had teeth. Home improvement contractors had to register with the Attorney General. Every job over $500 required a detailed written contract with 13 notices and disclosures. Time and material contracts were illegal. A contract that didn’t comply with HICPA was “void and unenforceable against the owner.” That means contractors had no right to collect. Violation of the Act was consumer fraud and carried heavy penalties.
When was the last time you had a pleasant surprise on a construction project – something that cost less than estimated or was easier than expected? It’s probably been a while. Most surprises are bad news – extra work and higher cost.
If you know a way to eliminate surprises, congratulations. You’ve got a rare gift. The rest of us have to deal with the unexpected. And that’s what I’m going to explain.