Duane Morris Construction Law

September 15, 2025September 15, 2025 by Jose A. Aquino

Court Affirms Default Finding in Public Contract Dispute

In a recent decision from the New York Supreme Court, Appellate Division, Second Department, In the Matter of New York Constr. & Renovation, Inc. v. City of New York Dep’t of Parks & Recreation, the court affirmed the dismissal of a hybrid proceeding brought by New York Construction & Renovation, Inc. (NYCR) against the City of New York Department of Parks and Recreation. The dispute arose from a construction contract awarded to NYCR in for the development of a comfort station in Canarsie Park in Brooklyn, New York. Although the Parks Department initially directed NYCR to begin work on March 1, 2019, it granted a one-month extension to April 1, 2019, in response to NYCR’s request. NYCR failed to commence work by the revised start date, prompting the Parks Department to issue a notice in September 2019 requiring NYCR to show cause why it should not be declared in default. Following a meeting, the Parks Department issued a default determination on October 30, 2019.

NYCR challenged the default determination through a hybrid New York Civil Practice Law and Rules (CPLR) Article 78 proceeding and sought declaratory relief. An Article 78 proceeding is the legal mechanism in New York that allows individuals or entities to seek judicial review of actions or decisions made by administrative agencies or public officials. It is commonly used to challenge determinations that are claimed to be unlawful, arbitrary, or procedurally flawed.

In this case, the Parks Department moved to dismiss the declaratory judgment claims, citing a contractual provision that limited NYCR’s remedies to judicial review under Article 78. The court agreed, holding that the parties’ contract expressly restricted post-default remedies and that the Parks Department’s determination was neither arbitrary nor capricious.

In an Article 78 proceeding, the court’s review is limited to whether the agency’s determination was made in violation of lawful procedure, was affected by an error of law, was arbitrary and capricious, or lacked a rational basis. Applying this standard, the court found that the Parks Department acted rationally in concluding that NYCR had defaulted. The agency’s decision was based on NYCR’s failure to submit an acceptable progress schedule, provide necessary submittals, and obtain a required permit from the Department of Buildings, all of which contributed to project delays.

NYCR argued that a moratorium on gas line applications by National Grid prevented it from obtaining the necessary permit, but the court declined to consider this claim because it had not been raised during the administrative process. The court also rejected NYCR’s due process argument, finding no procedural violations. Additionally, the court found no error of law and concluded that there were no factual issues requiring a trial.

Ultimately, the court upheld the Parks Department’s motion to dismiss, denied NYCR’s petition, and affirmed the agency’s default determination. The decision shows the importance following contractual and agency procedures when disputing government actions.

Jose A. Aquino (@JoseAquinoEsq on X) is a special counsel at Duane Morris LLP’s New York office, where he is a member of Construction Group, specializing in construction law, lien law, and government procurement law. He is also a member of the Cuba Business Group.

This blog is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed herein are those of the author and do not necessarily reflect the views of Duane Morris LLP or its individual attorneys.

September 9, 2025September 9, 2025 by Jose A. Aquino

Indemnity by Implication Rejected by the New York Judiciary

In a recent decision from the New York Supreme Court, Appellate Division, Second Department, Garcia v. Fed LI, LLC, the court addressed a dispute involving personal injury, Labor Law liability, and contractual indemnification. The case arose from an incident in which an electrician fell from an extension ladder while working on a commercial property. The property was owned by several entities and leased by Multi Packaging Solutions, Inc. (collectively MPS). The electrician and his wife filed suit under Labor Law § 240(1), also known as the Scaffold Law, which holds owners and contractors strictly liable for injuries to workers from falling objects or falls from elevations. The plaintiffs sought summary judgment on liability, while MPS sought to transfer responsibility to the electrician’s employer, J.P.S. Electric Co., Inc. (JPS), through a third-party contractual indemnification claim.

Indemnification emerged as the key issue on appeal. MPS contended that a purchase order issued to JPS approximately one month after the accident incorporated “Terms and Conditions” that included an indemnification clause. However, the court found this argument legally insufficient. Incorporation by reference requires that the referenced document be clearly identified and mutually understood by both parties. The material to be incorporated must be so well known to the contracting parties that a mere reference is sufficient. In this case, the purchase order did not specifically mention any indemnification clause, nor were the Terms and Conditions provided to JPS prior to the accident. The vague reference lacked the legal certainty required for incorporation, rendering the clause invalid.

Even if the indemnification clause had been valid, its timing presented another problem. Courts do not apply indemnity agreements to past events unless the contract clearly expresses that intention. In this case, neither the purchase order nor the Terms and Conditions manifested any intent to cover an incident that had already occurred. Because there was no clear language making the clause retroactive, it could not be used to shift responsibility for the accident. The court emphasized that indemnity agreements signed after an incident apply only when both parties clearly intended that outcome.

As a result, the court affirmed the dismissal of the third-party cause of action for contractual indemnification. JPS had no legal duty to indemnify MPS. This decision underscores the importance of clarity and timing in indemnity agreements. Parties seeking to shift liability must ensure that indemnification clauses are explicitly stated and properly incorporated.

September 5, 2025 by Jose A. Aquino

States and Developers Sue Trump Administration to Resume Construction of Wind Farms

Rhode Island and Connecticut, alongside developers Ørsted and Skyborn Renewables, are taking legal action against the Trump administration over its halt to construction on the Revolution Wind offshore project. The 704-megawatt wind farm, already 80% complete with 46 turbines installed, was ordered to stop work by the Bureau of Ocean Energy Management on August 22, citing national security concerns. The states filed suit in Rhode Island federal court, while the developers filed in the District of Columbia, both aiming to lift the stop-work order and resume progress on a project set to power 350,000 homes.

August 30, 2025 by Jose A. Aquino

Contract Enforcement and Licensing Requirements in Residential Construction: Differences from Florida and New York Courts

Home construction and improvement projects in the U.S. are governed state and local laws that require contractors to be properly licensed and registered. These laws are designed to protect homeowners and maintain industry standards. Whether building a new home or renovating an existing one, contractors are typically required to hold valid licenses, register their businesses, and comply with the laws and standards that govern the industry. If a contractor fails to meet these requirements, they may lose the ability to enforce their contracts, recover payment, or defend themselves in court, even if the work is completed.

A recent case from Florida illustrates the risks of noncompliance with contractor licensing statues. In CAM Bradford Homes, LLC v. Arrants, the Florida First District Court of Appeal upheld a trial court’s ruling that CAM Bradford Homes could not enforce its contract with homeowners because it was an unlicensed contractor. The homeowners had hired the company to build a single-family home in Fernandina Beach. Although the company owner, a certified general contractor, personally oversaw the project, he failed to register the business with the Department of Business and Professional Regulation as required by Florida law. As a result of this omission, the company could not pursue its claims in court.

Before the project was completed, the homeowners terminated the contract. CAM filed suit alleging breach of contract and other related claims, including lien foreclosure and unjust enrichment. The homeowners responded with counterclaims and moved for summary judgment, arguing that the contract was unenforceable because the company was unlicensed. The trial court agreed, finding that CAM’s failure to apply as a qualifying agent meant the company was unlicensed, and granted summary judgment in favor of the homeowners. On appeal, the CAM contended that CAM’s owner’s active role in the project should suffice to establish him as a de facto qualifying agent. However, the appellate court rejected this argument, emphasizing that statutory language requires formal registration and certification for a business to be considered licensed.

The court’s analysis leaned heavily on principles of statutory interpretation, particularly the surplusage canon, which holds that every word in a statute should be given meaning, and none should be interpreted as redundant or meaningless if it can be reasonably avoided. Accepting CAM’s argument would undermine the statute’s requirement of registration for business engaged in contracting. The court noted that only sole proprietorships may rely on an individual’s license without further application, and that CAM’s failure to apply meant the business never received the necessary certificate or registration. As such, the contract was unenforceable under, and the company was barred from asserting any lien or bond claims.

This decision stands in sharp contrast to Schott v. Lucatelli, a case recently reviewed in this blog, where the New York State Supreme Court, Appellate Division, Third Department took a more flexible approach to a construction dispute. In Schott, the court addressed a disagreement over the construction of a single family residence without a written contract. Despite the absence of a formal agreement, the court allowed recovery under the equitable doctrine of quantum meruit, awarding the contractor compensation for services rendered. The court found that the contractor had performed work in good faith, that the homeowner accepted the services, and that the work had reasonable value. Even after accounting for defective work, the court awarded the contractor a monetary judgment that included prejudgment interest.

While both cases involved building single-family homes and disputes over licensing, the courts reached different outcomes based on how they interpreted the law. Florida’s approach in CAM Bradford Homes emphasized strict compliance with licensing requirements. New York’s approach in Schott was more flexible, allowing recovery based on fairness and the realities of informal arrangements.

August 21, 2025August 21, 2025 by Jose A. Aquino

Judicial Caution in Determining Liability for Withheld Payments Under Public Works Contracts

In public construction projects, disputes over payment obligations between contractors and subcontractors often depend not only on the terms of the contract but on the resolution of underlying factual questions. A recent decision from the Appellate Division, First Department in Brownie Companies of Long Island, LLC v. Volmar Construction, Inc., illustrates the court’s cautious approach to summary judgment where material facts remain unresolved. The case, arising from work performed under New York City’s Build It Back Program, underscores the issues that can arise when payments are withheld due to alleged delays and potential liquidated damages. This blog examines the court’s reasoning and considers its implications for payment disputes arising from public construction contracts.

The subcontractor had entered into an agreement with the contractor to perform house lifting and repair services for homes damaged by Superstorm Sandy. The subcontractor alleged that the contractor breached the subcontract by failing to pay $474,000 for work performed and invoiced.

The court found that the subcontractor established a breach of contract, as the contractor failed to pay for work that had already been paid for by the City. It further held that, under established case law, contractors are obligated to pay subcontractors amounts received from the owner for their work. However, unresolved factual issues precluded summary judgment.

The court noted that key factual issues remained unresolved, including how damages should be calculated and whether the City had reduced its payments to the contractor due to delays caused by the subcontractor. The contractor had withheld payments in anticipation of liquidated damages the City intended to impose. The court acknowledged that such delays if proven could justify the withholding. As a result, the judgment in favor of the subcontractor was vacated, and the matter was remanded for further proceedings to address factual questions.

The court also held that the contractor’s motion for leave to amend its answer should have been granted. Through the proposed amendment, the contractor sought to assert counterclaims for indemnification, contending that if the City’s deductions were upheld and exceeded the amount remaining unpaid to the subcontractor, the subcontractor should be liable for the difference.

The decision highlights the importance of resolving factual disputes prior to summary judgment. By vacating the judgment and permitting amended pleadings, the court left open questions regarding the parties’ payment obligations, requiring further proceedings.

August 19, 2025August 19, 2025 by Duane Morris

Managing Tariff Volatility in Construction Contracts

The U.S. construction market is facing a new level of uncertainty driven by international trade decisions as tariffs become more frequent and unpredictable. Few factors unsettle a construction budget faster than uncertainty. When that uncertainty stems from tariff policies—where prices for essential materials can rise sharply with little warning—the impact is felt across the industry. Tariff volatility disrupts finances, supply chains, and project timelines, placing profitability and stability at risk. Read the full Building Design + Construction article by Jose Aquino.

August 17, 2025August 17, 2025 by Jose A. Aquino

Court Affirms Quantum Meruit Award in Home Construction Dispute

In Schott v. Lucatelli, decided by the New York State Supreme Court, Appellate Division, Third Department on June 12, 2025, the court addressed a dispute between two members of an extended family over the construction of a home. In 2017, the defendant asked the plaintiff to build a home, but the parties never entered into a written contract. Construction began in 2018, and while plaintiff was paid for work performed that year, a dispute arose in early 2020 over escalating costs. When plaintiff returned from a winter trip to Florida in April 2020, he discovered that defendant had changed the locks on the unfinished home and hired someone else to complete the project.

Plaintiff sued to recover compensation for work performed between May 2019 and January 2020. Defendant responded with counterclaims, including breach of contract. The trial court found no enforceable contract under New York General Business Law § 771, which requires a written agreement for building a new single-family home on land the buyer owns at the time of the contract. As a result, plaintiff could not recover under a breach of contract theory. Instead, the court evaluated his claim under the equitable doctrine of quantum meruit, which allows recovery for services rendered when no formal contract exists, provided certain elements are met.

The court found that plaintiff had performed services in good faith, that defendant accepted those services, that he expected compensation, and that the services had reasonable value. Plaintiff testified that he worked 31 weeks at 40 hours per week, and the court determined that $35 per hour was a fair rate, totaling $43,400. However, due to evidence of defective work, the court reduced the award by $12,750, resulting in a judgment of $30,650 in plaintiff’s favor. The court also granted prejudgment interest from the date defendant prevented plaintiff from completing construction.

On appeal, the defendant challenged both the award and the prejudgment interest. The appellate court affirmed the trial court’s decision, noting that the plaintiff had provided sufficient testimony and supporting evidence. It further held that prejudgment interest was appropriate, reasoning that although quantum meruit is an equitable theory, its quasi-contractual nature permits interest under NY CPLR 5001(a), which authorizes interest on damages in contract and property-related actions from the time the claim arose. Without deciding whether such interest is mandatory or discretionary, the court found the award proper under either standard.

August 7, 2025August 7, 2025 by Jose A. Aquino

Appellate Court Reaffirms Limits on Delay Damages in Construction Contracts

On June 5, 2025, the Appellate Division, First Department of the New York Supreme Court issued an opinion in Gamma USA, Inc. v. Pavarini McGovern, LLC, addressing the enforceability of a no-damages-for-delay clause in a construction contract between the subcontractor and contractor. The subcontractor had brought breach of contract claims based on alleged project delays, but the court dismissed those claims, citing the clause in the subcontract that barred recovery for delay-related damages..

The court found that the subcontract’s unambiguous Section 6.3 barred the subcontractor from recovering delay damages, regardless of other terms in the agreement. Section 6.3 provided:

“Notwithstanding any other provisions of this Subcontract, the Subcontractor agrees to make no claim for additional costs on account of, and assumes the risk of, any and all loss and expense for delay.”

This language was central to the ruling. It clearly allocated the risk of delay to the subcontractor and took precedence over any conflicting provision. The court rejected claims of ambiguity or conflicting terms and dismissed the case based on established precedent.

The subcontractor argued that exceptions to the no-damages-for-delay rule applied, including bad faith, reckless indifference, and breaches of fundamental obligations. The court rejected those arguments, concluding that the alleged conduct—such as poor planning, lack of scheduling detail, and removal of a crane—did not amount to intentional wrongdoing or fundamental breach. These were characterized as “inept administration,” which was insufficient to overcome the no-damage-for-delay clause.

The court also rejected the argument that the delays were unexpected. The subcontract clearly covered delays in starting, carrying out, and finishing the work. The subcontractor’s claim of a year-long delay did not alter the outcome, as the subcontract anticipated such delays.

The subcontractor’s claim that the contractor breached a fundamental obligation by failing to provide a crane was also dismissed. The subcontract stated that hoist size and capacity were limited, placed responsibility for oversized materials on the subcontractor, and gave the contractor discretion over site logistics. The court found no basis to support the argument that crane availability constituted a fundamental obligation under the subcontract.

This decision confirms that New York courts enforce no-damages-for-delay clauses that are clear and specific. Exceptions like bad faith or uncontemplated delays will not apply unless they involve conduct that goes beyond mere poor planning or administrative missteps. Subcontractors seeking to avoid the impact of such clauses must show that delays stemmed from deliberate misconduct or circumstances undisputably outside the scope of the agreement.

August 5, 2025 by Jose A. Aquino

Navigating Payment Protections in New York’s Public Improvements Without Public Funds

In New York, construction professionals face a distinct legal challenge when public improvements are carried out by private entities without public financing. Under the New York Lien Law, a “public improvement” refers to work performed on real property owned by the state or a public corporation. Mechanic’s liens apply only to private real property, while public improvement liens can be filed only against public funds. In the absence of either, contractors and suppliers lack a lien-based remedy to secure payment for their labor or materials.

To address this gap, the legislature amended Section 5 of the Lien Law in 2004 to require a payment bond for public improvement projects exceeding $250,000 when no public fund has been established. This bond guarantees prompt payment to contractors, subcontractors, and suppliers and serves as the exclusive financial safeguard in such cases. The statute as amended provides in pertinent part:

“Where no public fund has been established for the financing of a public improvement with estimated cost in excess of two hundred fifty thousand dollars, the chief financial officer of the public owner shall require the private entity for whom the public improvement is being made to post, or cause to be posted, a bond or other form of undertaking guaranteeing prompt payment of moneys due to the contractor, his or her subcontractors and to all persons furnishing labor or materials to the contractor or his or her subcontractors in the prosecution of the work on the public improvement.”

Unlike traditional payment bonds—which are typically posted by contractors or subcontractors as part of their contractual obligations—the Section 5 bond must be posted by the private developer. This statutory requirement shifts the financial responsibility upstream, placing the burden on the entity commissioning the work rather than those performing it. This framework ensures workers and suppliers receive payment even when lien rights are unavailable.

While this Section 5 bond protects against nonpayment in the absence of public funds, developers also typically require contractors to furnish other types of bonds within the construction agreement. These include payment bonds, which ensure compensation for subcontractors, suppliers, and laborers, and performance bonds, which guarantee that the contractor completes the work as specified under the contract. Though separate from the Section 5 bond, these additional bonds serve complementary roles—one aimed at securing financial compensation, the other enforcing contractual execution.

A key distinction exists between mechanic’s liens and payment bond claims. Mechanic’s liens typically permit recovery only for unpaid amounts owed to the defaulting party. If a contractor or subcontractor has already been paid, downstream parties—such as unpaid subcontractors or sub-subcontractors—may be left without lien rights. In contrast, payment bond claims offer broader protection. An unpaid party may still recover under the bond even when no outstanding obligation remains to the defaulting contractor or subcontractor, provided the claim is timely and complies with the bond’s terms.

Together, these provisions form an integrated framework of financial and legal safeguards. For those engaged in public improvement projects without direct public financing, understanding these requirements is essential to managing risk and securing payment.

August 1, 2025 by Jose A. Aquino

New York Appellate Court Highlights Standards for Dismissal and Summary Judgment in Contract Cases

In its July 30, 2025 decision in All Nations Steel Corp. v. KSK Construction Group, LLC, the New York Appellate Division, Second Department, reinforced the legal standards for dismissal and summary judgment motions in breach of contract cases. The case arose from a dispute between a subcontractor (the plaintiff) and the general contractor and project owner (the defendants) over the termination of a subcontract. The subcontractor claimed it was wrongfully terminated, while the defendants argued the termination was justified because the subcontractor did not obtain the required insurance.

The defendants moved to dismiss the complaint, or alternatively for summary judgment, including a request to limit damages to $50,000 based on a liquidated damages clause. The trial court denied the motion in all respects, and the appellate court affirmed.

The appellate court emphasized that dismissal is only appropriate when the documentary evidence “utterly refutes” the complaint’s allegations and “conclusively establishes a defense as a matter of law.” Here, the defendants’ affidavits and insurance documents failed to meet that high bar. Affidavits are not considered documentary evidence, and the insurance policy submitted did not definitively disprove the plaintiff’s claim that it complied with the subcontract’s requirements.

The court reiterated that on a motion to dismiss the complaint must be liberally construed, with the plaintiff afforded every favorable inference. The complaint sufficiently alleged the elements of a breach of contract claim: the existence of a contract, plaintiff’s performance, defendants’ breach, and resulting damages. The defendants failed to show that any of these allegations were indisputably false.

The court also rejected the defendants’ request for summary judgment. The defendants failed to meet their initial burden of showing that the termination was justified. Because they failed to eliminate all material issues of fact, the court did not even need to address the plaintiff’s opposition papers. Similarly, the request to limit damages under the liquidated damages clause was denied because factual disputes remained as to whether the clause applied—specifically, whether the termination was due to a material breach by the plaintiff.

This decision reinforces the legal standards required to succeed on a motion to dismiss or for summary judgment in contract disputes. It also reflects the courts’ reluctance to enforce liquidated damages clauses where the underlying breach is contested. The decision is a reminder that conclusory assertions and incomplete records will not suffice to dispose of claims at the pleading or summary judgment stage.