Cash flow is the lifeblood of the construction industry. This phrase, coined by Lord Denning MR, and cited relentlessly in the construction industry still holds true. In times of recession, following the cash and preserving the funds that are in dispute is crucial. There is no point in spending time and money pursuing a dispute to fight over a pot of cash that is at real risk of being dissipated.
New York’s State Legislature has just passed a bill that would require a no-prejudice standard be applied in determining the application of notice provisions in public construction contracts. 
The bill amended current statutes  so as to require that unless the public owner can show they have suffered material prejudice as a result of a contractor’s (or/and subcontractor’s) failure to provide timely notice, rights are not barred. If the required notice is received more than 180 days after the time required under the contract, the burden to establish no-prejudice shifts to the contractor/subcontractor.
The Legislature Memo prepared to explain and support the bill referred to current notice provisions as one-sided and unfair “gotcha” provisions. The Memo further contended that some public owners were getting “free work” when contractors or subcontractors are barred from pursuing claims due to non-compliant notices.
Another significant element of the bill appears in the definitional section where it is provided that a “public owner’s actual knowledge of the events in question shall preclude a claim of material prejudice due to any lack of notice.” Some city and state contracts often specifically provide that actual knowledge cannot relieve contractors of the strict requirements of the notice provisions.
The bill will not become effective, however, until 180 days after it is signed by the Governor and becomes law and then only as to contracts awarded after that date.
The text of the bill is here .
1. The bill is A10136 and S6906 which passed on June 18, 2016.
2. The bill amends the Public Authorities Law, the General Municipal Law, the Public Service Law and the State Finance Law.
The economic loss rule is alive and well in California. In State Ready Mix, Inc. v. Moffatt & Nichol (2015) 232 Cal.App.4th 1227, the Court of Appeal ruled that a concrete supplier (State Ready Mix, Inc., or “Supplier”) could not seek equitable indemnity or contribution from an engineer for the cost to remove and replace Supplier’s concrete that was non-compliant with Supplier’s own contract. Although the Court minced no words when it described the factual basis for its ruling (“If [Supplier] wants to see who is at fault, it should look in the mirror.”), the most notable aspect of the opinion was its analysis and rejection of the legal theories of potential liability. Continue reading “Tort-Based Indemnity/Contribution Remedies Not Available to Shift Contract Damages”
With its new Standard Construction Contract, issued in December 2013, the City of New York (the “City”) has implemented numerous significant changes as compared with its 2008 standard contract. The most widely discussed change in the City’s standard construction contract is the elimination of an express “no damage for delay” clause. At least ostensibly, the new contract represents a more flexible approach to delay damages by enabling the contractor to recover for delays in factual settings not previously amenable to delay claims. This Alert briefly summarizes some of the new provisions.
Click here to read the full Alert.
The good news is that public works construction projects for municipalities are projected to remain a major sector of construction activity for the foreseeable future. The not-so-good news is that municipal bankruptcy filings are on the rise, and they are likely to increase. The issues facing parties under contract with a municipality when it files for bankruptcy protection are playing out nationally in places like Stockton, California, and Detroit, Michigan. Construction lawyers now more than ever need to know the risks of a public owner filing for bankruptcy protection before project completion, and what they can do in the event it does so before the project is closed out—thereby jeopardizing the owner’s ability to pay.
Last summer, the United States Court of Appeals for the Third Circuit issued a precedential opinion in Sloan Co. v. Liberty Mutual Ins. Co., 653 F.3d 175 (3d Cir. 2011), that had broad implications for the construction community, because it affirmed an important industry-standard practice. More specifically, the Third Circuit held that a “pay-if-paid” provision in a subcontract, which provided that the general contractor’s receipt of full payment from the owner is an express condition precedent to the subcontractor’s right to full payment from the general contractor, was valid and enforceable by the general contractor and/or its payment bond surety.