An appeals decision by the Seventh Circuit underscores the importance of strict adherence to the requirements of the Miller Act. A&C Construction & Installation, Co. WLL v. Zurich American Insurance Company and The Insurance Company of the State of Pennsylvania, decided June 30, 2020, concerns a Miller Act claim on a payment bond by a subcontractor on a federal construction project.
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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.
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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.
Continue reading Pennsylvania State Court Enforces Pay-If-Paid Clause
Under Pennsylvania’s Mechanics’ Lien Law, only a “contractor” or “subcontractor” is permitted to file a lien claim against an owner of property, 49 P.S. § 1303(a), for the payment of debts due by the owner to the contractor or by the contractor to any of his subcontractors for labor or materials furnished during a project. 49 P.S. § 1301; see 49 P.S. § 1201(4), (5) (defining “contractor” and “subcontractor”).
On January 6, 2012, the Pennsylvania Superior Court held in Bricklayers of W. Pa. Combined Funds v. Scott’s Dev. Co., 2012 PA Super 4; 2012 Pa. Super. LEXIS 5 (2012) that a labor union is a “subcontractor” under the Mechanic’s Lien Law, and, therefore, trustees of a union benefit fund have standing to file a mechanic’s lien claim on behalf of its members.
As a result of the Superior Court’s ruling, labor unions will likely file more mechanics’ lien claims for unpaid and/or delinquent contributions. Thus, in order to ensure that no mechanic’s liens are filed on a project, owners should attempt to verify on a monthly basis that money is properly disbursed down the construction chain. Towards that end, an owner needs to obtain partial payment releases from its contractors and subcontractors on a monthly basis. In addition, an owner should consider making certain payments by joint check, if the owner suspects any problems.