Georgia Construction, Bond & Lien Law Blog

Delicious Constructions

Posted in Fun! by Blue Blog on the January 27th, 2015

Chocolate pavilion (blog)


by:  Dorothy Spencer

Barry Callebaut North America, a branch of the world’s largest chocolate manufacturer, is assisting several engineers and architectural colleagues at Princeton University to test the potential of using chocolate as a building material.

The group have conducted a series of tests using various formulas to determine its strength and elasticity using the hypothesis that with less fat and smaller particles, and greater surface area, the chocolate is stiffer, and thus, more cohesive.

In fact, the group has designed its first full-scale prototype (shown above) as a pavilion designed for use at a café.  The pavilion will be on display for several weeks, of course in a temperature-controlled environment in a New York City building.  One of the scientists, Alexander Jordan, writes, “To avoid exposure to direct sunlight coming through the south-facing windows, obstruction of customers and staff traffic, and accidental collisions, the shell was designed to use the vertical space and span between the fixed pavilions that separate the café’s tables.”  The pavilion was constructed by casting pieces of chocolate (with a melting point of 125 degrees Fahrenheit), assembling them over a model, and held together by depositing molten chocolate through a syringe.

Jordan goes on to say, “Although we have associations with chocolate as a highly refined food, there are few precedents of how to translate its familiar sensation into architectural and engineering language.”

Chocolate lovers from all around the globe are happy to see this kind of study and give it an A+, keep up the delicious work!

willy wonka (blog)

Exceptions to “No Damages For Delay” Clauses

Posted in Case Law,Damages by Blue Blog on the January 26th, 2015

contruction contracts include no damages for delay provisions
A “no-damages-for-delay” (NDFD) clause is a very common contract term that provides a defense for the delay-causing owner or general contractor to assert against the harmed party’s request for damages. This defense can be applied to protect the owner from a general contractor’s delay claim or the general contractor from a subcontractor’s claim. These clauses allow additional time, but no additional compensation. Without such a clause, the contractor generally has the right to a time extension and damages if the delay was caused by the owner.

Courts generally enforce clear and unambiguous NDFD clauses, but there are a few exceptions. Some of these include the protected party’s (1) active interference or (2) fraud or bad faith (including willful, malicious, reckless, or grossly negligent misconduct); (3) delay not contemplated; and (4) unreasonable delay.

1. Active Interference:
If the protected party intentionally inserts themselves into the harmed party’s execution of duties, they may be guilty of active interference and therefore precluded from relying on the NDFD clause. In the recent (out-of-state) case C&C Plumbing & Heating, LLP v. Williams County, the North Dakota Supreme Court recognized the “active interference” exception. This case found the owner’s active interference with the contractor’s preferred means and methods to be sufficient cause to trigger the exception and allow damages despite the inclusion of a NDFD provision. The Court reaffirmed that the active interference exception does not require a showing of bad faith by the interferer, but “an affirmative, willful act that unreasonably interfered with the plaintiff’s performance of the contract.” However, active interference does not include “a simple mistake, error in judgment, lack of total effort, or lack of complete diligence.”

2. Fraud or Bad Faith:
Courts generally will prevent the party demonstrating intentional misconduct – such as fraud or bad faith – from escaping liability through a NDFD clause. Contract provisions seeking to prevent liability for fraud are considered to be against public policy and therefore unenforceable. So the party exhibiting fraud or other willful misconduct that causes delay cannot hide behind a NDFD clause. An example of willful and malicious misconduct can be found in U.S. for Use and Benefit of Evergreen Pipeline Construction Co., Inc. v. Merritt Meridian Construction Corp. The contractor caused delay and harmed a subcontractor by refusing to make full payment (thereby preventing sufficient hiring), grossly inflating backcharges, and stealing the subcontractor’s materials. The Court found that such willfully malicious conduct prohibited the contractor from enforcing the NDFD clause against the subcontractor.

Willful concealment of foreseeable delay-causing facts or circumstances may also preclude the wrongdoer from relying on the NDFD clause. In Howard Contracting, Inc. v. G.A. MacDonald Construction Co., Inc., the city willfully concealed the facts that excavation would require a special dump site and that the construction would be federally prohibited for a significant time. These factors caused inevitable delay for which the contractor was unable to plan. The Court prevented the city from enforcing the NDFD clause against the contractor’s claims.

3.  Delay Not Contemplated:
Some courts have prevented the enforcement of a NDFD clause when the delay is not reasonably contemplated by the parties at the time of contracting. The applicability of this exception is largely determined by the exact language included in the NDFD clause and its intended scope. Such circumstances that have qualified for this exception include a city’s failure to attain a required right-of-way and a subcontractor’s inability to perform due to severe and continuous schedule and access mismanagement by the contractor.

4.  Unreasonable Delay:
Some courts have found that an unreasonably long delay may justify the preclusion of the NDFD clause. Since there is no set rule or general understanding of how long a delay must be to be considered unreasonable, all the facts surrounding the circumstance of the delay should be considered. This exception usually has not required the harmed party to abandon the project, although some courts have defined “unreasonable delay” to be “a delay so long as to justify an abandonment of the project.”

These cases underscore that including no-damages-for-delay clauses is not an absolute defense for the delay-causing party. These clauses should be carefully drafted and all parties should understand the potential for exceptions. Each jurisdiction interprets these provisions differently and recognizes different exceptions, so it is important to seek legal advice given your specific set of circumstances.

Cobb to Present Live Webinar on How to Create Better Construction Contracts for Free

Posted in Contracts,Honors & Awards by Blue Blog on the January 23rd, 2015

Cobb Law Group to Present Webinar on Improving Construction Contract

Clear your schedule and mark your calendars, Georgia Construction Contract Attorney, Mark Cobb, will be leading a Webinar on Better Customer Contracts: 15Free Things You Can Do To Create Better Sales Contracts.

When:  Wednesday, January 28, 2015 at 3:00 EST

Sponsor:  Cabinet Makers Association


For more information, please click on the links below . . .

To see the announcement on FDMCDigital, please click here > >

To register as a participant for the CMA’s webinar, please click here > >

This low-cost seminar is focused towards the needs of owners and credit managers and small to mid-sized contractors, subcontractors and building material suppliers; at CMA’s request, Mark will discuss tips and strategies which the participants can implement immediately after the webinar!  Although the title is Better Customer Contracts: 15 Free Things You Can Do To Create Better Sales Contracts, Mark hopes to have time to offer even more tips.  So register today to listen to the live Webinar presented by our own construction lawyer, Mark Cobb.

Cobb on Atlanta Legal Experts Radio Show

Posted in Fun!,Honors & Awards by Blue Blog on the January 22nd, 2015
Cobb Speaks on Construction Law Fundamentals on Atlanta Legal Experts

Mark Cobb (second from the right) and the other panelists inside the studios of Atlanta Legal Experts

by Mark A. Cobb

Earlier this week, I had a wonderful experience: I was invited to be interviewed on the Atlanta Legal Experts radio show to discuss Georgia Construction Law. It was quite an honor to be asked to appear on this show as Atlanta Legal Experts is one of the many great shows on Buckhead Business Radio. To hear a podcast of the show and my comments about materialmen liens and payment bond claims, please click here > > >

Although I had to arrive at their Buckhead studio pretty early in the morning, as soon as I entered the green room, the producers and hosts made me feel comfortable about being interviewed. Emily Rowell was the show’s host and Alvaro Arauz was the co-hosts. Both demonstrated wonderful demeanors and worked well together, and, they asked me and the other panelists some very good questions.

The had invited three other Atlanta-area attorneys to be interviewed during this show. Prior to meeting at the studio, I did not know any of these attorneys, but they were each very personable and professional. As it turns out, Nate Hansford, a workers’ compensation lawyer in Atlanta, was graduated from my alma mater (Washington and Lee University) with mutual interests and connections.

Another bright, energetic attorney on the panel was Myrlin Earle; Myrlin began his practice representing insurance companies, and now he focuses on personal injury work. As with many litigators, he had some very exciting stories to share about his courtroom experiences!

The third panelist was Lorena Saedi of the Saedi Law Group who practices bankruptcy law in Atlanta. In discussing her firm, she emphasized that clients meet with an actual attorney and not a legal assistant. This is a great policy and it’s always refreshing to meet attorneys who care about their clients.

Georgia Lien Law Expert Mark Cobb

Atlanta Attorney Mark Cobb discusses construction liens and contracts on Atlanta Legal Experts Radio

The show allowed me to educate the audience on subcontractor rights regarding payment for their materials, labor and services on construction projects throughout Georgia. As I discussed the advantages that subcontractors and building material suppliers have in collecting the money they are owed through the use of liens, surety bonds and Georgia’s Prompt Payment Act, I also pointed out that construction lawyers such as myself often sit in the middle of the project and we consult with–and bring in–legal specialists as needed. Both our large prime contractors and regional subcontractors as well as contractor laborers may experience a job-related injury on the construction site; furthermore, there are so many parties involved on a construction project that the risk for bankruptcy is real and affects those downstream (it typically does not affect their rights to file a mechanics or materialman’s construction lien or their right to file a claim pursuant to a payment bond.) Thus, it was very beneficial to me to make the connections with these other Atlanta Legal Experts.

Also, as a group we were able to discuss current legal trends. Undocumented aliens, for example, have some (but not all!) of the rights given to United States citizens. I was able to discuss some of the fraud issues which we have encountered in our practice when an unscrupulous general contractor or subcontractor tries to take advantage of someone who is undocumented or someone who struggles with English because it is their second language. These individuals deserve competent legal representation.

Our group also discussed the economy from our unique perspectives. I was able to share that our clients–regardless of their position as a prime contractor, a specialty trade subcontractor or a materialmen–are seeing larger construction projects, more opportunities to bid for work, and more new developments getting underway.

If you missed the show or have any questions about Georgia construction law including construction contacts, construction liens, materialmen’s lien rights, payment bonds (including Miller Act and Little Miller Act), delays or damages, please contact me.

Atlanta Construction Law Expert Mark Cobb

Atlanta Legal Experts (l to r) co-host Alvaro Arauz, Myrlin Earle, Nate Hansford, Lorena Saedi, Mark Cobb and co-host Emily Rowell

Thank you Atlanta Legal Experts for choosing me to be interviewed and continued good luck with the show in the future!

Mark Cobb Atlanta Construction Law on Atlanta Legal Experts

Mark Cobb joins the panelists on Buckhead Business Radio’s Atlanta Legal Experts show

Cobb Interviewed in Expert Series

Posted in Honors & Awards by Blue Blog on the January 8th, 2015

Our firm’s founding partner, Mark Cobb, was recently chosen to be the inaugural interview for a new series called the Construction Expert Interview Series. Mark was chosen to participate because of his leadership in Georgia construction law and, in particular, subcontractor law, mechanics and materialmen lien law, payment bond claims, and construction collections.

Informing clients about their rights as construction professionals is a significant part of Mark’s daily job, and he welcomes any opportunity to disseminate information to contractors, specialty trade subcontractors and materialmen about using Georgia’s laws to their advantage and to enhance their legal rights. Mark thoroughly enjoyed the interview process as he frequently speaks at seminars and training workshops throughout the southeast on lien and bond issues as well as various construction contract topics.

The interview was sponsored by Surety Solutions. To learn more about Georgia construction law and to read the article in its entirety, please click here > >

If you have any questions regarding Georgia construction contracts, any type of construction liens, Miller Act or Little Miller Act claims, please feel free to contact us today!

Top Ten New Years Resolutions for Construction Professionals

Posted in Practical Tips by Blue Blog on the December 30th, 2014

Now is the time for Contractors to make their New Years Resolutions


by Mark A. Cobb

As humans, we use milestones to mark our journeys; as one year fades into another, it is natural for us to claim the calendar change as an opportunity to make changes within ourselves. Fortunately, in 1885, the Church of England’s Bishop Beckwaith provided us with a useful formula for making effective and permanent changes in our lives:

Plant a thought and reap a word;
Plant a word and reap an action;
Plant an action and reap a habit;
Plant a habit and reap a character;
Plant a character and reap a destiny.


The most successful humans are leaders in both their personal and their professional lives; consequently, those who want to succeed are willing to change–to improve themselves, their businesses and their lives. Thus, without any pretensions, we offer this year’s list of the Top Ten New Years Resolutions for Construction Professionals:

10. Take time to understand the other person’s position:

It doesn’t matter whether you are a design professional trying to fit your client’s desires (and needs!) into a budget or whether you are a project manager negotiating a change order with a subcontractor, it is very important to recognize the validity of the other person’s opinion. Acknowledging and understanding another person’s position can go a long way in avoiding potential disputes or quickly resolving a current dispute.  Respect appears to be disappearing in the construction industry–promise to prevent its further erosion in the new year!

9. Money is important, but it isn’t the most important thing:

With today’s increasingly tight profit margins, even small bumps can derail projects and bankruptcy contractors, thus, there is an ever-increasing temptation to deny payments to those downstream, to cut-corners where corners should not be cut, and to worry more about your own job-security than the success of the project. Do not give sway to these temptations. Instead, be professional; treat others the way you wish to be treated, and look for a successful project completion for all of the participants. This is a wonderful time to remember that reputation, dignity, and honor trump profits in every long-run scenario.

8. Use fair and balanced construction contracts:

We see more and more general contractors handing down increasingly onerous construction contracts which could be summed up with the following statement:  “Subcontractor Agrees to do anything and everything the Prime Contractor requires (whether known or unknown to the Subcontractor); and, for this work, the Subcontractor will only be paid the amount stimulated below if and when the Prime Contractor wants to.” This is neither fair nor right. Contracts have become solely about transferring risk and listing reasons to withhold payment; instead, we argue that construction contracts should be about ensuring mutual successes on a given construction project, reaching just conclusion in the event of a (real) dispute, and cooperation between the project owners, prime contractor, subcontractors and material suppliers.

7. Watch those emails and texts:

Almost daily we are appalled by construction professional’s reliance on text or emails to transmit important communications and even contractually required notices. Unfortunately, this type of communication lends itself to a “too concise” ability to communicate and “too casual” form for addressing important topics. If something is important, then take the time to write a letter (it forces you to be more professional, more accurate and less likely to be misinterpreted) and attach it as an email. Do not let text and email “conversations” be substitutes for meetings where you can meet face-to-face. And–frankly, we are shocked about this–watch the curse words and pejorative statements in your emails. They can (and will) be used against you.

6. Manage Your Stress:

From project scheduling to unexpected weather conditions, from slim profit margins to job security, the construction industry is filled with stress. There are wonderful resources available to help everyone deal with stress, so promise to avail yourself of some of these resources. Remember to spend time with your family, relax, and, if necessary, find a new job!  Stress damages your physical body, it decreases your profitability, and it destroys relationships.

5. Know your contracts:

If our clients had taken the time to review their construction contracts and the possible consequences of a breach or a problem, they could have prevented many problems. It may seem boring or redundant, but review every contract as if it were your first contract; then, as the project continues, occasionally review the contract to remind yourself of potential pitfalls and notice requires. Meet EVERY notice obligation which you have.  If you don’t have the time, desire or interest in doing this, then find a competent construction lawyer to help you manage this aspect of your business.

4. Set realistic, positive goals:

If your business isn’t growing, now is an ideal time to evaluate where your business has been and where you want it to go. Consider establishing a business plan and/or a marketing plan. Consider joining professional organizations which can help you with these projects (such as the American Subcontractors Association, Associated General Contractors, Construction Suppliers Association, etc.). Take a look at the type of projects on which you work and whether or not these are the projects which you want; consider taking on larger projects (but don’t stretch yourself too thin); if you are not currently bonded, take steps to build a relationship with a quality surety.

3. Treat your employees well:

This one should be obvious, but the stress, economic limitations, and competitive bidding can make employers forget that their employees are their finest asset. There are many ways to improve employee relations, and only some of them involve money! Provide educational opportunities, safety training, positive recognition, even treating an employee to lunch can lead to a more satisfying workplace.

2. Build the next generation of construction professionals:

It is universally acknowledged that the skilled-labor work force is diminishing at an alarming rate, and that means labor shortages and increased labor costs for every prime contractor and subcontractor. We advocate adequate training for your employees, but don’t forget the next generation of employees. There are countless opportunities to work with your area technical colleges to build programs specific to your needs, if you are looking for a place to make a year-end donation, consider funding a scholarship at your local school to train the next electrician, mason, or project manager! Be creative and participate in a grass-roots program to stimulate young people to pursue careers in the construction field.

1. Be honest.

This one, too, should be obvious. Be honest with your yourself–know your strengths and weaknesses and strive for improvement. Be honest with your family and your co-workers; truthfulness builds respect from those around you.  Admit your mistakes, acknowledge when others are right (even though you may be wrong), and build your destiny on a solid foundation.

Whatever your goals are for the coming year, the construction attorneys at the Cobb Law Group wish you success. Now is a great time to plant the thoughts directed by Bishop Beckwaith to create a new destiny for yourself and your business.

Happy Holidays

Posted in Uncategorized by Blue Blog on the December 19th, 2014

Christmas Greetings to Our Construction Clients

During this special holiday season, the attorneys and staff of the Cobb Law Group would like to take this opportunity to thank our clients, friends, colleagues, and vendors for their support. We truly believe that our clients are among the finest construction professionals in the country, and it’s their hard work and their integrity which we protect.

We represent construction professionals in many different situations, but many of our clients are contractors or material suppliers who have fully performed under some type of contract but another party failed to pay them. Other clients look to us to help them with their contract drafting and negotiation or to resolve disputes. Regardless, it is an honor to be a trusted advisor to these wonderful people.

Whether we represent a large Fortune 500 company or a local, mom-and-pop contractor, we understand that it is about the people–it’s about relationships, it’s about integrity, and it’s about hard work. We are grateful that so many of our clients share the same values as we do. In this day, finding quality construction professionals can be difficult, but we have the honor of working with some of the best!

As we look back every year, it is natural to reflect upon the lessons and changes which have occurred. It is especially appropriate this year as 2014 brought many positive changes to our firm and business. To recap just a few of our highlights from the year:

  • Our client base has almost doubled!
  • We filed scores of Georgia materialmen’s liens and payment bond claims
  • We were featured speakers at the AGC Georgia’s First Construction Forum and Marketplace
  • Mark was a co-author of the book Construction Subcontracting, A Comprehensive Legal and Practical Guide which was published this past spring by the Forum on the Construction Industry a part of the American Bar Association
  • We’ve hired a new construction and environmental lawyer (who will be joining us in January 2015)
  • We published the 28-page booklet entitled Georgia Material Supplier Collection Handbook
  • We presented “Construction Contracts 101″ for a continuing education seminar for architects and engineers
  • We were asked to speak at a roundtable sponsored by the Construction Suppliers’ Association
  • We moderated a telephone conference for a nationwide construction lawyer’s group on emerging trends in construction payment issues
  • Christopher was nominated for Leukemia & Lymphoma Society’s Man of the Year
  • Mark was Chairman of the Board of Trustees for The Vashti Center (2d year)
  • Mark was approved to teach an undergraduate class on Construction Law for spring 2015 at Thomas University
  • Mark was asked to lead a Webinar on construction contract basics for the Cabinet Makers’ Association
  • The Cobb Law Group continues to be a leader in Georgia’s Subcontractor Law

2014 was a great year, but our expectations for 2015 are even higher! Thanks to a tremendous and loyal client base, great lawyers and staff who are active in their communities, and several surprises in the pipeline, we are confident that the coming year will be even better!

Georgia Construction Law Course Offered in Thomasville

Posted in Honors & Awards by Blue Blog on the December 11th, 2014

Mark Cobb teaches Georgia Construction Law at Thomas University

For the past several semesters, Mark Cobb has been an adjunct professor in the Thomas University School of Business. He has taught primarily in the MBA programs focusing on leadership and business economics. In January 2015, however, Mark will teach a special topics course on Georgia Construction Law which he hopes will be appealing to current students as well as to area professionals!

“Construction contracts,” says Mark, “are business contracts on steroids; they frequently involve multi-million dollar projects, investors, contractors, scores of subcontractors and hundreds of sub-subcontractors and suppliers; furthermore, they can take years to complete and the contracts are frequently amended due to such factors as cost escalation, changing site plans, investor issues, and weather.” Thus, Mark shared, “this class presents the perfect canvas for understanding every aspect of business.”

Since this course is being offered on the undergraduate college level, he wanted the class to learn skill that reach beyond mere construction law; thus, his class will use the construction industry as a real-world backdrop for an understanding that will translate to the larger world of business. Specifically, the course will look at contracts, negotiation, and resolution–three areas used almost everyday by Mark in his practice.

On a more-specific level, the students will cover such topics as project development, visionaries, banking issues, the economic impact of government funded construction projects, competitive bidding and the free market, preferential bidding and its impact, estimating and accounting practices, profit calculation, contract drafting and terminology, contract negotiation, insurance requirements, payment issues, contract breach/default, dispute resolution options, construction project scheduling, successful leadership strategies, and business ethics. As Marks describes this college course, “It’s a one-stop shop for business success in the 21st century.”

Because this class is a hybrid class (it meets for a live class one day a week and the balance of the work is handled on-line), Mark looks forward to bringing in engaging specialists in development, town planning, construction, bidding, and minority-own businesses as guests to enliven the conversation and provide students with access to area professionals.

The class is open to all Thomas University students, but anyone who wishes to participate in the class is welcome to audit the class (for more information, click here to contact Thomas University Admissions; the course ID is BUS449-HYA.Sp2015).

The syllabus is still being finalized, but there will likely be one large projects as well as weekly research, writing and discussion assignments. The larger project will be negotiation of a contract dispute in which students will be expected to prepare for and persuasively present their case and find a workable solution. Due to the universal applicability of the class, a background in construction or law is not needed.

When Mark began teaching at Thomas University, he had been working on a book entitled Construction Subcontracting: A Comprehensive Practical and Legal Guide to be published by the American Bar Association. When the book was published in the spring of 2014, Ann Marie Emmons, Chair and Assistant Professor of Business at Thomas University, suggested that Mark use this book as a guide for a special topics class, and he has been planning on the best way to make this class useful to all business students and construction professionals.

Now that this special topics class is a reality, Professor Emmons states that “Thomas University is pleased to offer a unique special topics course for business management majors this spring. We are excited to have Mark bring his area of expertise, for which he has extensively presented and published, to our students; it will certainly enrich our students’ knowledge of the complexities and practical considerations in the real world business environment.”

Professor Mark Cobb teaches Georgia Construction Law

Mark has been a Georgia construction attorney for over 20 years; he began working at a boutique law firm in Atlanta, and in 1998 he opened his own firm, the Cobb Law Group. The firm now has two offices representing contractors, specialty trade subcontractors, and materials suppliers throughout the state. He received his J.D. from Washington and Lee University School of Law, and he has lectured and published extensively on construction contracting, Georgia materialmen’s liens, and payment bonds claims and law. Mark is married and has two children.

If you have any questions regarding the class which Mark is teaching the spring of 2015, or if you have any Georgia construction law needs, please contact mark here > >

Recent Case Highlights the Importance of the Construction Contracts

Posted in Case Law,Contracts,Joint Ventures by Blue Blog on the November 26th, 2014

Drafting Joint Venture Agreements for Construction Projects in Georgia

In a case decided on November 17, Inland Atlantic Old National Phase I, LLC et. al. v. 6425 Old National, LLC, the Fourth Division Court of Appeals of Georgia ruled on fiduciary duties owed under joint venture agreements, applied rules of contract construction, and briefly addressed substantial versus strict compliance.

Background:  The parties – Inland Atlantic and Old National – entered a joint venture LLC and made other necessary agreements to develop a shopping center. During Phase I (of II), issues arose with the quality of an on-site contractor, which Old National failed to properly supervise. Due to complications in Phase I, Inland Atlantic did not hire Old National for Phase II. Old National brought suit and Inland Atlantic counterclaimed. After the trial court ruling granting and denying various parts of motions of summary judgment, both parties cross-appealed. In this consolidated appeal, the Court of Appeals addresses these claims and the trial court’s treatment of summary judgment.

A court may grant summary judgment, alleviating the need for a full trial, for the party requesting it – the movant – if there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law.

Fiduciary Duty as Managing Member of LLC:

According to Georgia statutes (OCGA § 23), a fiduciary duty exists “where one party is so situated as to exercise a controlling influence over the will, conduct, and interest of another or where, from a similar relationship of mutual confidence, the law requires the utmost good faith.” Breach of such a fiduciary duty requires (1) the existence of a fiduciary duty, (2) the breach of which (3) proximately causes damage.

Additionally, a member of a limited liability company only owes statutory duties to that LLC if the member is managing an aspect of the LLC’s business affairs. That duty owed is one of good faith and the care an ordinarily prudent person. (OCGA § 14-11-305) If a member of an LLC is not managing as aspect of LLC business, this duty does not apply (unless otherwise provided for by agreement). Therefore, a member of an LLC without managerial responsibilities has no duty to the company by just performing its duties as a member.

In this week’s Inland Atlantic decision, a joint venture agreement between Inland Atlantic and Old National delegated some managerial duties to Old National.  Inland Atlantic argued that that the trial court should not have granted summary judgment to Old National on Inland Atlantic’s breach of fiduciary duty claim with regard to the parties’ joint venture agreement. The appellate court agreed, ruling that Old National might have had a fiduciary duty to Inland Atlantic under their joint venture agreement. This is a remaining question of fact as to whether Old National was managing some of the LLC’s affairs; therefore, summary judgment was inappropriate.

Fraud and Fiduciary Duty to Disclose Material Facts:

A fiduciary relationship includes the duty to disclose material facts. Therefore, suppression of a material fact by a fiduciary party constitutes fraud.

Fraud requires the defendant, having both (1) scienter (knowledge of one’s wrongdoing) and (2) the intention to induce the plaintiff to act (or refrain from acting), to (3) make a false representation to the plaintiff, (4) on which the plaintiff justifiably relies and which (5) causes damage to plaintiff.

Here, Inland Atlantic claimed Old National committed fraud and negligently misrepresented the abilities of site-work contractor “Lewis,” whom Old National insisted on hiring and who was having “financial difficulties” before being retained. Old National insisted on using Lewis and may have known of their financial trouble, but represented that Lewis would be able to finish the project.

Inland Atlantic contended that granting summary judgment to Old National on Inland Atlantic’s claims for fraud and misrepresentation was inappropriate. The appellate court agreed, as there was a material question of fact as to whether Old National was managing some of the LLC’s business affairs (as examined above) and therefore owed a fiduciary duty to Inland Atlantic under their joint venture agreement. If such a fiduciary duty existed, then Old National had the duty to disclose material information regarding Lewis’s ability to complete the project. Since a question of fact remains, this court reversed the grant of summary judgment on the fraud and negligent misrepresentation claims.

Rules of Contract Construction – Examining Breach of Contract and Indemnification Claims:

When a court evaluates a contract claim, the court looks at the plain meaning of the contract terms. If these terms are ambiguous, making the contract unclear, the court must apply rules of contract construction. First, the court will ascertain the intent of the parties at the time the contract was executed. If the intent cannot be determined, then the terms of the contract are material questions of fact for a jury to answer.

The rules of contract construction also provide that indemnification terms should be construed strictly against the indemnitee. Furthermore, ambiguity should be construed against the drafter.

In Inland Atlantic, Old National argues that the trial court erred in not granting them summary judgment on Inland Atlantic’s breach of contract claim. However, the plain and unambiguous terms of the contract provide that Inland Atlantic’s actions do not waive their right to a breach of contract claim. Furthermore, there were two remaining questions of fact based on the evidence of record: (1) Did Inland Atlantic waive their right to a breach of contract claim by making final payment without notifying Old National of its deficiencies? And (2) Did Old National breach the contract by failing to properly supervise and manage the project?  With these questions of fact unanswered, summary judgment on the breach of contract claim was appropriately denied.

Old National also contends that the lower court erred in denying their motion for summary judgment on Inland Atlantic’s indemnification claim. The indemnification provisions say that both parties indemnify each other, making both parties indemnitees and indemnitors. This is an ambiguous term. So, who is the proper indemnitee is a remaining question of fact for the jury to answer since the rules of contract construction fail to solve the issue here.

Substantial Compliance Required:

A party to a contract must only substantially comply with the contract termination clause. Strict compliance is not required. (See Rome Healthcare LLC v. Peach Healthcare System, 264 Ga. App. 265, 272 (5) (590 SE2d 235) (2003).)

Here, Old National contends that the trial court erred in not finding that a contract was not terminated. Inland Atlantic was not required to strictly comply with the contract term stating that either party could terminate with 30 days written notice. Inland Atlantic’s repeated notifications to Old National regarding Old National’s deficiencies may be considered substantial compliance. Again, this is question of material fact for a jury to decide.

Conclusion:  This case is another reminder of the importance of contract drafting on construction projects; specifically, here are some practical tips which we can take away from this decision:

1.  Joint Ventures between contractors may include fiduciary responsibilities between the parties.

2.  Fiduciary relationship includes the duty to disclose material facts. Therefore, suppression of a material fact–such as the possibly inability of a subcontractor to fully perform its contract– by a fiduciary party constitutes fraud.

3.  Construction contract terms need to be unambiguous.

4.  Read your contract to understand (and follow) the termination provisions.

Cobb to Speak at CSA Roundtable

Posted in Creditors' Rights,Honors & Awards,Materilamen's Liens by Blue Blog on the November 4th, 2014

We are happy to announce that Mark Cobb will be speaking on creditors rights to a group of lumber and building supply owners at a roundtable forum sponsored by the Construction Suppliers Association (CSA) on Monday, November 10, 2014 and hosted by Fuller Building Supply Company.

Georgia Material Suppliers Association Lien Info

Mark will be discussing several topics related to material suppliers and their rights under Georgia law including the following:

Credit Applications and Personal Guarantees: Mark will discuss the importance of gathering information from the very beginning of the credit process to make debt issues easier to collect in the future. Mark will offer tips on

  • How to create a more thorough credit application
  • How to get updates for your credit applications and personal guarantees
  • Easy ways to verify the information on the credit application
  • Personal Guarantees greatly increase the likelihood of recovery
  • Terms and conditions can make it easier and less expensive if you have to collect bad debt

Georgia’s Statutory Construction Notice Scheme: Mark will lead the discussion on the advantages and disadvantages of the Georgia’s notice scheme including:

  • Useful information found on the Notice of Commencement
  • When to send a Notice to Owner/Notice to Contractors (Notice of Furnishing)
  • Practical tips to make the process smoother

Georgia’s Lien Waivers: Mark will introduce the attendees to the only authorized forms (for interim and final lien waivers) as well as:

  • Conditional waivers v. unconditional waivers
  • Lien waivers potentially shorten the deadline for filing a Georgia materialmen’s lien
  • What to do if you don’t receive payment within 60 days
  • Georgia Affidavits of Nonpayment

Georgia Preliminary Liens: Mark will introduce the collection process by clarifying the following:

  • The difference with preliminary liens and standard materialmen’s liens
  • Who should file the preliminary lien
  • When should a creditor use / file a preliminary lien
  • When preliminary liens expire

Georgia Materialmen’s Lien Law: Because of the numerous advantages to creditors in Georgia who supply materials (or labor or services), Mark will give an in depth presentation on Georgia’s lien laws including the following:

  • When to file a lien in Georgia?
  • The deadline for filing a lien
  • What amounts are lienable?
  • The statutory requirements for filing a lien?
  • How to enforce a lien?
  • Why does lien enforcement usually take two law suits?

Collection Suits: Although many materialmen’s lien claims are resolved without have to enforce them, sometimes creditors must take the next step. Mark will discuss:

  • When is Georgia Magistrate Court appropriate?
  • Venue and jurisdiction
  • Types of judgments (i.e., judgment liens)
  • Lawsuits to foreclose a materialmen’s lien
  • Other collection lawsuits (e.g., garnishment of wages, bank accounts, etc.)

Claims Against Public Works Projects: Since construction liens cannot be placed against publically owned projects (projects owned by the federal, state or local governments), Mark will discuss the basics of payment bond claims:

  • Payment bonds covering private construction projects in Georgia
  • Payment bond requirement under federal law
  • Payment bond requirements under state law
  • Deadlines for making payment bond claims for nonpayment
  • The claims process for payment bond claims (surety claims)
  • Suits to enforce payment under a payment bond

Although the roundtable is open only to CSA members, Mark can prepare a similar presentation for you or your organization. For more information, please click here > > or email Mark today.


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