by Mark A. Cobb
We always enjoy sharing great blog articles with you. Sometimes, the topics just happen by themselves, sometimes they are based upon a real-life experience with a client or opposing counsel, other times they are more deliberate such as series of articles on a particular construction topic. Regardless of the source, our attorneys strive to offer something well-written that is informative, practical, or, occasionally, funny.
Looking through our archives of articles, there are many articles about contracts including how to improve your contracts, the different types of construction contracts, specific provisions within contracts, and case-law interpreting contracts. Although all of this information is very useful to our readers, there was a glaring omission from the archives: no article discussed the “art” behind writing a meaningful contract. That started my mind thinking about what to say and how to best convey the concept of contract as “art”.
When I was a child visiting a modern art museum on a school field-trip, I remember a guide pointing out that when a viewer studies certain pieces of art, it is incumbent to realize what is missing from the canvas as meaning can form from the absent. Perhaps this isn’t as provocative, but drafting construction contracts are similar–it’s important to recognize that what they are not; then, what remains on the canvas likely has a greater importance.
Every Construction Project is Unique:
Despite our desire for convenience and ease, construction contracts cannot be the same. Every project and every party to a project is different; thus, there is “no one-size fits all”. It doesn’t matter whether you are always in the role of a general contractor or you sometimes act as a general contractor and other times you are a subcontractor, no single contract will serve you well in every project.
Furthermore, every project has is own set of needs and requirements. Isn’t is easy to spot the different needs between a contract for the construction of a health care facility, a federal military base, a church, a jail, a restaurant, and a house? Are the project owners an entity, an individual, a committee, a board? Regardless, these obvious changes–as well as the more nuanced differences–should be reflected in every construction contract which you sign.
You Cannot Simply Fill-In-The-Blank:
Construction contracts are not forms to be “filled-in”. Many construction professionals believe that with the proliferation with the AIA documents, ConsensusDocs, and other construction document banks, that creating a contract is nothing more than completing a form. This is not true for the forms banks nor is it true for an attorney-drafted contract. Admittedly, the form banks can be useful starting points for contract negotiation; however, they are intended to be modified and virtually every responsible owner or GC we know regularly modifies the documents offered through these services. In addition, these banks have preferences and legal theories that may not reflect your business’ values and, in fact, may be prejudiced against it. (Can you guess which party is the “preferred” party in the American Institute of Architect’s–the AIA–documents?)
The Personality of the Contract:
Form sites offer only one personality which probably doesn’t fit for you or your job. Personality in contracts can be difficult to articulate. Recently, I used the following examples for a client who required a written contract between an owner and the GC. Contracts can be difficult to read (arrogant), they can be easy to read (friendly), they can be boring (too academic), they can be one-sided (bullying), they can be simple (dumb), they can be inappropriate (immature), they can be a hodge-podge of cut-and-paste provisions from other sources (sloppy). In short, contracts can assume any shape or “personality” the parties want. And, it should be pointed out, this personality does not impact the strength of its particular provisions nor the enforceability of the contract!
Another significant component is the “fairness” of the contract. True, there may be certain provisions for which a particular party may not have room for negotiation; however, that is not true for most of the contract. Thus, parties (and the attorneys who draft the contracts) must decide how forceful the contract will be. We have seen contracts which give one party a seemingly limitless supply of rights which denying the other party virtually every right. Other contracts try to mimic the old-fashioned “hand-shake” where parties pledge to do their best and, in the event of a problem, they continue to resolution in good-faith. A party requesting a contact needs to ask themselves what they want their (legal) reputation to be. Are they going to be hard-nosed about every term and condition or are they going to look at each term and condition from each side’s perspective? Is there a chance that the parties will work together on other projects? Are the parties more concerned about successful completion of a project or are they more interested in smashing those downstream?
Yes, Contracts Mirror Your Values:
There are personal values and corporate values which should be incorporated into every artfully drawn construction contract. Values run the gamut from legal compliance to employee cursing on the jobsite, from a Christian’s implementation of the Golden Rule to dress codes, from work ethic to dispute resolution. It is vital to think about what is written down and how it is written before giving another party something to sign.
Although most individuals are complex and our individual personalities may slide between highs and lows, there is no reason for a well-drafted construction contract to be anything other than a fluid, consistent document. But, this may take some time and effort on your part, but we have found that clients who invest in well-written contract can use those documents for more than just protecting themselves legally. They are furthering their reputations, they building business, and they are reflecting on the types of business values they actually possess. And, most importantly, they are the most successful in performing their work.
Federal Court Rules that Subcontractor Duties Are Not Terminated by Contractor’s Modest Underpayment
The Mar-Paul Company, Inc. (“Mar-Paul”) entered into an electrical subcontract with Butch-Kavitz, Inc. (“Butch”) for a renovation project at the Tobyhanna Army Depot in Pennsylvania owned by the United States Army Corps of Engineers. The subcontract amount for electrical and generator work by Butch was $452,000.00. However, the owner of the project called for a variety of expansions to the work that altered the scope of Butch’s involvement on the project. The subcontract amount was increased by over $33,000.00 to correspond to Butch’s additional work, bring the adjusted contract price to $485,004.68.
Throughout the course of the performing work on the Project, Butch submitted pay applications to Mar-Paul. Although Mar-Paul and the project owner approved all ten of the pay apps, Mar-Paul failed to make sufficient progress payments to Butch on three of them. The largest amount Mar-Paul underpaid was $549.84. However, Mar-Paul overpaid by as much as $8,678.49 on the other seven pay apps and remedied each deficiency on their next payment. These discrepancies were due to the ledger used by Butch that did not account for the lesser amounts approved by the owner and failed to include the 10% retainage. Mar-Paul paid Butch a total of $402,004.68 for completed work.
Nonetheless, Butch walked off the job alleging nonpayment. To complete the work, Mar-Paul hired additional subcontracts at a total cost, including overhead and profit, of $100,423.56.
Butch brought a breach of contract suit against Mar-Paul in the U.S. Middle District of Pennsylvania, claiming the contractor failed to pay over $121,000.00 for completed work. Mar-Paul disputed these claims, arguing that they paid Butch for their completed work in accordance with the terms of the subcontract. The subcontract provided that all payments were subject to the approval of the U.S. Army Corps of Engineers. Accordingly, Mar-Paul’s counterclaim sought the additional expense of $17,866.36 incurred as a result of Butch’s abandonment and breach.
After hearing evidence, the court opined on three main issues to be resolved: (i) an ultimate determination of the subcontract price, accounting for the numerous changes to the project by the owner; (ii) whether Mar-Paul defaulted on its payment obligations, which would entitle relieve Butch from completing the remainder of its obligations under the subcontract; and (iii) the amount of damages recoverable pursuant to the subcontract.
When Butch walked off the job, the owner had previously approved $381,206.27 of Butch’s work as complete. However, the owner, withholding $30,702.65 in retainage, only provided Mar-Paul $350,503.63 payable to Butch for the work completed. Nevertheless, Mar-Paul paid Butch a total of $359,182.12, which was $8,678.49 more than Mar-Paul had received from the owner for Butch’s work.
The court found that Butch’s deserting the project was not justified by the negligible underpayments by Mar-Paul, which were found to not be a material breach. As Mar-Paul did not breach the subcontract, Butch was not relieved of its duty to perform. Therefore, the court ruled that Butch materially breached the subcontract by abandoning the job without cause. Accordingly, Butch was not entitled to further payment but, instead, Mar-Paul was entitled to restitution from Butch.
The measure of damages caused by a subcontractor abandoning the job is the difference between the cost to complete incurred by the contractor and the subcontract price. In this case, the unpaid subcontract price, the amount Butch would have been paid if they had finished the job, was $82,993.83. To complete the project after Butch walked off the job, Mar-Paul spent $100,423.56. Therefore, Mar-Paul was entitled to the difference of $17,429.73, plus attorney’s fees.
Case at ButchKavitz, Inc. v. MarPaul Co., Inc., 2015 U.S. Dist. LEXIS 160652 (M.D. Pa. Dec. 1, 2015)
by Mark A. Cobb
Many clients ask about Georgia’s Notice of Intent to File Lien requirements, and there are always surprised to hear the short answer: Georgia does not require any type of Notice of Intent to File Lien. However, the longer answer may provide some helpful insight for a lien claimant getting the money they are owed. Let’s explore this a bit further . . .
In Georgia a Notice of Intent to File Lien is not the following:
First, let’s take note of what a Notice of Intent to File Lien is not. It is NOT the same as a Notice to Owner or Notice to Contractor (sometimes called a Notice of Furnishing). In order to take advantage of Georgia’s lien statutes, certain subcontractors and suppliers are required to send a Notice to Owner/Notice to Contractor within the first 30 days that they begin working or supplying to the construction project. Thus, it is important to understand the difference between a Notice of Intent to File Lien and a Notice to Owner. For more information on Georgia’s Statutory Construction Notice Scheme, please click here > >
Similarly, a Notice of Intent to File Lien is NOT a Preliminary Lien. The Georgia Mechanics and Materialmen’s Lien Act includes a section on filing Notices of Preliminary Lien. A preliminary lien is not a Claim of Lien under Georgia law; instead, it is an optional tool used by subcontractors and suppliers to defeat contractor affidavits and put the owner on notice that the potential lien claimant is performing work or supplying materials to the project. For more information on Georgia’s Preliminary Lien scheme, please click here > >
In some states, a Notice of Intent to File Lien is a prerequisite to filing an action lien claim. In Georgia, however, potential lien claimants do not need to send a Notice of Intent to File before filing a construction lien, stop notice or making a bond claim.
What Use does a Notice of Intent to Lien have in Georgia?
As mentioned above, some states have specific requirements regarding the timing and use a Notice of Intent to File Lien; since Georgia does not currently have this requirement, we have the option of using it to help our clients get their payments more quickly and less expensively.
Since Georgia does not have a requirement that lien claimants send a Notice of Intent to Lien prior to filing their claim of lien with the clerk of court, the project owner or the general contractor may not be aware of any downstream payment problems until they receive notice that a lien has filed. Responsible project owners and general contractors often involve themselves immediately upon their receipt of a copy of the lien; this, of course, can lead to prompt payment (which is the goal!). Imagine, however, if the lien claimant had send a notice to the project owner, the general contractor, the surety and other interested parties prior to filing the lien. This would give responsible project developers and contractors the ability to involve themselves in the payment issues and, possibly, lead to a prompt payment to the potential lien claimant.
Using such a notice–a (unofficial) Notice of Intent to File Lien–could be effectively used to inform those parties upstream of a subcontractor payment issue without the cost and expense of preparing an filing a materialmen’s lien.
Furthermore, since Georgia has no statutory requirement for an Intent to Lien, that means that such a letter can be customized to reflect such information as the potential lien claimant needs to encourage voluntary payment by the owner or contractor. For example, some of the notice which we have sent on behalf of clients may be very succinct and to the point. For example, it may say:
ABC SUB-SUBCONTRACTOR was engaged by ABC SUBCONTRACTOR to perform work on the NEW PROJECT located in YOUR TOWN, GEORGIA; to date, ABC SUB-SUBCONTRACTOR is owed $_____ for it work. Unless payment in full is received within five (5) business days, then notice is hereby given that ABC SUB-SUBCONTRACTING will file a lien against said project pursuant to the Georgia Mechanics and Materialmen’s Lien Act.
In other situations, it may be useful to provide more details, include copies of such documents as the following:
- Outstanding pay apps
- the sub-subcontract (or highlight relevant provisions from the sub-subcontract)
- detailed narraitve of the facts including work performed, communication issues
- subcontractor project accounting
- notices to owner/contractor (NTOs)
- a copy of the lien to be filed if payment is not forthcoming
Also, sometimes getting a notice from a subcontractor on an attorney’s letterhead can make a general contractor or owner pay a little more attention to the situation. For these and many other reasons, it is frequently recommended that a lien claimant send a Notice of Intent to Lien in Georgia so long as there is time to prepare and send the notice without missing the deadline to file the lien.
An Important Reminder Regarding Lien Deadlines
Regardless whether a lien claimant utilizes the advantages of serving a Notice of Intent to Lien on a construction project owner or a general contractor, it is important to note that sending such a notice DOES NOT extend the deadline to timely file a materialmen’s lien. In Georgia, liens must be filed either within 90 days of the last day of actual work on the job or 60 days from the date of a lien waiver whichever is shorter.
The Cobb Law Group is pleased to be nominated as one of the best construction law blogs in the country! This prestigious designation is sponsored by a group of construction professionals who review, rate and rank the construction blogs every year. In fact, this is the Georgia Construction Lien & Bond Law Blog’s four nomination in a row!
Previously, our blog was ranked third in the country; and, this year, we are shooting for first-place! Please help us out by clicking on the link below and voting for the Cobb Law Group:
“One reason why we appreciate this designation, is because it’s not just a popularity contest. Yes, readers’ votes help to keep the blog in front of the judges’ eyes, but the judges review each nominee for content and relevance to the construction professional” states Georgia construction attorney Mark Cobb, founder of the Cobb Law Group.
Today, we are pleased to present Vic Lance as our guest blogger for our Construction and Lien Law Blog. Vic Lance is the founder and president of Lance Surety Bond Associates. He is a surety bond expert who helps contractors get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business. The ideas and opinions expressed here are the solely those of the author and do not necessarily reflect the ideas and opinions of the Cobb Law Group.
After a solid 2015, the prospects for the construction industry in the coming year couldn’t be more optimistic. Analysts predict a 6% overall growth and projected $712 billion value of the industry.
A variety of factors will drive change in construction. Besides workforce shortages, technological innovation, and shifting consumer preferences, construction industry trends will also be shaped by legislative changes throughout 2016.
New requirements will take effect to improve diverse aspects of construction. Standards on diversifying, tighter rules on contractor bond claims, anti-discrimination rules, and immigration regulations will be some of the influencing legislative factors this year.
While stricter legislation mean more effort on the side of construction contractors, this will help solidify the industry and improve it in the long run. Let’s take a look at the five major legislative trends for 2016.
#1. Focus on safety and industry problems
This year, the U.S. Department of Labor’s Occupational Safety and Health Administration is definitely putting a strong focus on fixing safety issues and misdeeds in construction. For the first time since 1990, OSHA increased its fines for violation of its rules by construction companies.
With construction accidents rising due to inadequate safety measures, a disproportionate number of foreign-born workers suffer injuries and even death. In many cases, such workers are not hired legally, and regular audits show that many construction companies continue this practice. Immigration and Customs Enforcement is likely to enforce more checkups and penalties this year to address the problem.
Other U.S. authorities are also increasing control over contractors in order to prevent safety violations, corruption and all kinds of misconduct in the industry. Some hope also that OSHA’s higher fines will be used for education and training of contractors, so that future accidents, fraud, and mishaps can be decreased.
#2. Beware of False Claim Act liability
Enforcement of False Claim Act actions has been a priority for the federal government since 2014. This trend will certainly continue in 2016, as fund recoveries under the Act had already reached $22.75 billion by the end of 2014. The Act targets cases of contractors working on public projects who break the rules, by overcharging on materials and labor, providing low quality materials and work, or falsifying accounts.
Besides the legislation on the federal level, numerous state agencies have enacted their own acts to counter fraud and misuse against state and local authorities. Florida, California, and New York are just a few of the states where parallel legislation has been created and enforced.
To successfully adapt to this legislative trend, construction contractors working on public projects must be well-informed about FCA liability and FCA actions. It’s also a wise step to get acquainted with penalties’ limitations statutes that appeal courts are applying today. Seeking legal help is highly advised, as professionals would be best suited to advise construction companies on potential liability areas.
#3. Construction bond claims still problematic
Surety bonds for the construction sector– such as performance and payment bonds – have been used for decades, but some issues around them remain misunderstood and cause serious trouble for contractors. While there is no new upcoming legislation in this field, the legislative problems caused by noncompliance in bond claim cases are worth the attention.
A common pitfall is that construction contractors are not aware of the statutes set in the bonds they post in relation to project bidding and execution. Common misunderstandings include when you need to file a subcontractor in default and, more generally, how to handle bond claims in the best possible manner. This trend is causing millions lost for construction companies and difficulties for project owners.
Contractors can counter these problems with detailed knowledge of their obligations under the bonds they obtain. It’s more common for construction professionals to be aware of the rules that govern payment bonds, but when it comes to performance bonds, issues persist. Getting to know the terms of your bonds can save you a lot of hassle later– and a lot of money.
#4. Contractors bound to diversify projects
Even though the Small Business Administration expanded its Mentor-Protégé Program in 2015 and has been running its 8(a) Business Development Program for a while, a recent SmartBrief poll shows that the majority of businesses think that contractors should diversify their projects.
Using the opportunities set forward by the SBA, as well as the plentiful public projects that contractors can bid on and the different supporting government programs have been of great help to contractors over the years. Yet, the road towards a truly stable construction industry goes through construction professionals exploring different niches and diverse projects.
Relying on state help and support programs can only take construction businesses so far. Expanding into new types of projects, incorporating continuing education and training and resourceful investments are the upcoming trend for contractors in 2016.
#5. Green building growing strong
As in recent years, green buildings are in higher demand. Legislative trends in the industry also support the gradual switch to sustainable construction, as well as climate change negotiations and national commitments towards eco-targets.
LEED construction practices are one of the many ways in which the U.S. construction industry is catching up with environmental concerns and regulations. The push towards greener buildings comes not only from the legislative level, but also from client’s preferences. Institutional and commercial buildings are the ones that are most often required to meet green standards, but the trend is also moving in residential construction.
All in all, savvy contractors have a lot to gain in 2016. From increased focus on safety standards and green buildings to stricter rules under the False Claims Act, the construction field is bound to get stronger and more stable in the year to come.
What are your top legislative trends in construction for this year? What do you think will drive change in the industry? We’d love to hear your opinion in the comments below.
By Stephanie Dodson Dougherty
Nonresident contractors and subcontractors who plan to perform work in Georgia must register their business with the Georgia Department of Revenue for tax purposes. This registration must be completed within six months before or after the start date for the Georgia work. Tax types for which nonresident contractors must register include Sales and Use, Prepaid Wireless 911 Charge, Payroll Withholding, International Fuel Tax, Alcohol Tax, Tobacco Tax, Motor Fuel Distributor, and Miscellaneous Withholding. New businesses registered in Georgia must file a tax return monthly for six months, after which the business may change their filing frequency.
Registration requires various forms depending on the type of work to be performed and the contract price to be paid. Basic required information for registration includes business type, legal name, contact information, an operational and monitored email address, FEIN, and other taxpayer information. Registration also requires the names and detailed information for company officers and responsible parties. Partnership and LLCs are required to register at least two officers. Each business registration costs a small processing fee.
NAICS codes are also required. The North American Industry Classification System (NAICS) is the standard used by federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy. Careful attention should be paid when determining the proper NAICS codes for one’s business. The most recent catalogue of codes is the official 2012 U.S. NAICS Manual, which includes definitions for each industry, background information, tables showing changes between 2007 and 2012, and a comprehensive index. This Manual is available online at http://www.census.gov/cgi-bin/sssd/naics/naicsrch?chart=2012.
Business registration requires various Georgia Department of Revenue forms depending on the contract under which one plans to perform in Georgia. Nonresident contractors and subcontractors should be prepared to issue a Power of Attorney and bonds proportional to the contract price. For contracts over $250,000.00, optional supplemental bonds are available, under which a 2% retainage is required. Additional filing is required after project completion to release any retainage held.
Although some information about this registration process in available online, the Georgia Department of Revenue’s website and rules have not been updated to match the most recent statutory requirements. Additionally, each registration presents unique and often unforeseeable challenges. Therefore, it is advisable to consult an attorney whenever a business attempts to complete a new business registration in Georgia. If you have any questions about starting this process, please feel free to contact us.
by Mark A. Cobb
Tragedy faced many construction business during the Great Recession. It impacted every layer of business from project developer and large prime contractor to building material supply stores and day laborers. Virtually no one was left unscathed.
This year, thankfully, there has been a turn-around in the construction industry. There are new public projects, new industrial and commercial projects, and new home construction. In fact, we poll our clients constantly, and the signs of prolonged improvement to construction economics are evident. Nonetheless, we should not forget the lessons that were learned during those recent, lean years.
Smart businesses learned from the mistakes revealed during the recession, and they have improved their efficiencies, they have reduced waste, and they have recognized the need for customer appreciation. When our clients call us and ask us to help consult on their construction business, we start with areas which devastated many industry participants. Here are some of the common suggestions which we make:
1. Fix Your Customer Contracts! Many specialty trade contractors have never used an attorney to prepare their construction contracts; or, if they did, it was a long time ago. This is a big mistake. True, laws change and your contracts should reflect these changes, but, more importantly, many client’s contract give up their rights because they started with sloppy contracts. For example, it is easier (and less expensive) for you to collect attorneys fees when you go after the money you are owed if your contract adequately addresses attorney’s fees. Unless an experienced construction lawyer has worked with you on your contract, then you may forfeit these rights.
2. Negotiate/Review Your Contracts: When a subcontractor works for a prime contractor, it is typical that the GC provides the subcontractor with a contract to sign. Wait! Have a competent Georgia construction attorney review the contract and negotiate it on your behalf. If you blindly accept the contract because “you need work” or because you are “too busy”, then you are gambling that the contract will protect you in case of a contractor’s failure to pay. In addition, due to the limited, skilled workers in the field, a subcontractor may have an easier time negotiating its contract than expected.
3. Shore Up Your Credit Applications: Business is good right now, but it’s worth taking time to update your credit applications, personal guarantees, credit card authorization forms, etc. The steps you take now can save you money in the long-run (and increase your recovery!)
4. Due Diligence: It doesn’t matter whether you are a large national general contractor or a local specialty trade subcontractor, few parities use the opportunity to conduct meaningful due diligence on their business relationships. We saw this failure to conduct due diligence bankrupt businesses in the second and third years of the recession, yet, it was totally unnecessary.
5. Document! Document! Document! Although it has been (and will always be) a significant area of contention, change orders presented many hurdles for subcontractor payment issues during the recession. Prior to performing work on a change order, make sure that you have the WRITTEN CONSENT of the general contractor and the owner of the project. Yes, its frustrating, yes its
6. Document Problem Areas. Similarly, when any issue erupts on a project site, document it, and document well. For example, keep thorough, complete daily logs, take photo graphs, document the issues in writing. Also, of course, make certain that you meet any notice deadlines required in your contract.
7. Be Wary of Email. Email (texting too) is a blessing and a curse in the construction industry. Email consents can be useful, however, they tend to be vague and / or out of context. When it come to something important, write a letter–at least write a “letter-style” email which is more formal. Assuming your contract doesn’t contradict this, you can probably send your letter via email, but a letter forces most writers to more-fully develop the situation and place it in the correct context. This can save ambiguity, confusion or “he-said/she-said” situations down the road.
8. Watch Out for Georgia’s Lien Waivers. If you execute a partial or final lien waiver in Georgia, make sure that you get your money very quickly. If you don’t get the money you are owed and if you don’t take certain steps within 60 days of the date of the lien waiver, then you may forfeit your right to payment forever. Assuming that a lien release is submitted with each pay app, then letting any invoice be out longer than 30 or more days hurts subcontractors immeasurably. Keep an eye on your receivables and remember to file either an Affidavit of Nonpayment or a Claim of Lien within 60 days of the date of your lien waiver for an unpaid Application for Payment.
9. Send a Notice to Owner/Contractor! During the recession, we hated telling clients that they had forfeited their rights to file a materialmen’s lien in Georgia because they had failed to send a timely Notice to Contractor / Notice to Owner (other states refer to this document as a Notice of Furnishing or Notice of Commencement of Work). Under current Georgia law, those in privity of contract withe the owner (i.e., general contractors and 1st tier subcontractors) do not have to send the NTO; those who lack privity of contract with the Owner (i.e., sub-subcontractors and material suppliers) must send an NTO within the first 30 days in which they begin work on the project or begin supplying to the project. Although this may seem like a hassle, it’s an inexpensive step and can increase your recovery rate significantly.
10. Payment Bond Claims. Many credit managers and construction professional understand that (most) government projects are required to have a payment bond in place for the benefit of subcontractors and suppliers; however, many do not know that often there are payment bond on private projects as well. And, if they don’t know about the payment bonds and don’t make a timely claim against the payment bond, then they may be losing a potential source of recovery. Don’t forget to look for payment bonds covering private projects!
11. Design Professional Have Rights Too. Traditionally, architects and engineers do not experience the same level of payment problems as other construction industry professionals, and this is usually credited with the fact that they are often paid first. The recession changed this, and all service and design professional have rights which may include the right to file a claim of lien for the money they are owed. Don’t let ignorance of Georgia’s law or professional “pride” prevent you from getting your payments by timely filing a lien for design services.
12. Mechanics & Materialmen’s Liens/Payment Bond Claims. Since we’ve been in this business for over 20 years, it’s hard to understand why everyone doesn’t file a lien if they don’t received payment for their materials, labor, services or equipment which they provided to a project. It’s vital that you meet the deadlines and all the technical requirements for filing a lien. Don’t let missing a deadline stop you from getting paid. Also, don’t forget that you can file a lien for your retainage — don’t let the time lapse to take this vital step.
Now, is a great time to position your construction business for the future, and the steps which you take now can make a world of difference tomorrow.
The Cobb Law Group makes every effort to get its readers informed about changes in the law, but occasionally, we offer basic guides to improve the foundations of business. Thus, beginning with this blog entry, we embark on a multi-blog article on Georgia contracts and, specifically, Georgia contracting in Georgia.
Thus, the following is Georgia Contracts Skeleton Outline which we intend to use as a framework for building this on-going series of useful articles:
a. Common law (contracts for services and property sales) – all essential terms required
b. UCC (contracts for the sale of goods) – “gap fill” missing elements
b. Construction revocation
e. Offeror’s death
f. Reasonable time passes3. Irrevocable
b. UCC firm offer
c. Performance of unilateral offer
d. Detrimental reliance
a. Follow rules of offer
b. Mailbox rule – accepted when sent
2. By silence
a. Unilateral rewards or offers
b. Unilateral offer geographically close
c. Past history of silent acceptance
d. Offer requires and offeree intends
1. Common law – mirror image requirement
a. No mirror image requirement
b. Knock-out rule
c. Battle of the forms
d. New terms associated if:
• Both parties merchants
• No material change
• Offeror didn’t limit to original terms
• No objection in reasonable time
1. Under seal
2. Bargained for detriment or benefit
ii. Consideration substitute
1. Promissory estoppel
iii. If contract modified
1. Common law – pre-existing duty plus (1) change of performance, (2) third party agreement to pay, or (3) unforeseen difficulties
2. UCC – no consideration needed for good faith modification
1. Infancy (with exceptions)
2. Mentally ill
3. Intoxication (with exceptions)
1. Mutual (not enforceable in Georgia)
iv. Fraud – plus offer to restore
D. Statute of Frauds
i. Applies to:
1. Contracts for marriage
3. Contracts that cannot be performed in under one year
4. UCC contracts for over $500
5. Real property interest transfer
6. Promise by executor, administrator, guardian, or trustee to pay for damages from their estate (in Georgia)
7. Revive debt barred by Statute of Limitations (in Georgia)
8. Money lending (in Georgia)
1. Common law
a. Service contract – full performance or signed contract
b. Real estate contract
• Signed contract
• Partial performance plus two: (1) possession, (2) payment, (3) improvement made
a. Signed writing with quantity of goods
b. Performance (for delivered and accepted units)
iii. Modified contract – must be in writing if the new contract would qualify for Statute of Frauds
II. Contract Performed or Excused
A. Parole Evidence Rule
i. Complete integration of agreement in writing
ii. Applies to evidence from before writing
iii. Not applicable if prior evidence is to show:
1. Contract formation defense
2. Separate deal
3. Clarify ambiguous term
B. Warranties (UCC only)
i. Express (not opinion)
ii. Implied merchantability (if seller is merchant)
iii. Implied fitness for a particular purpose (in Georgia – only applies to immediate seller and buyer/buyer’s family/household guests)
i. Express – objective standard of satisfaction
1. Common law
a. IF substantial performance and no material breach
b. THEN recover cost of completion or diminution in market value
a. Perfect tender required for goods and delivery (except for installment contract)
b. Risk of loss: (1) determined by contract, (2) breaching party, (3) buyer if shipment contract, seller if destination contract, (4) merchant until buyer obtains goods, (5) buyer when goods tendered
D. Excuses to performance
i. Impracticability – requires statute or contract provision allowing in Georgia
ii. Impossibility – unless promisor’s proper prudence could have avoided in Georgia
iii. Death of required specific performer
iv. Frustration of purpose
v. Cancel contract if performance remains on both sides
vi. Accord and satisfaction
viii. Recission for fraud or nonperformance
1. Common law – writing and consideration
2. UCC – writing
x. Destruction of identified goods
III. Remedies for Breach
A. Anticipatory repudiation
B. Money damages
1. Put non-breaching party in economic position as if contract performed
a. Reasonable certainty
b. No unforeseen consequential damages
c. Mitigation efforts made
3. Special circumstances
a. Lost volume profits
b. Incomplete performance
c. Economic waist and diminution of market value
ii. Consequential – only if solely traced to breach or exact compensation in Georgia
v. Liquidated – if allowed for in contract, injury hard to estimate, damages intended (not penalty), reasonable pre-estimate of loss
vi. Punitive – willful, malicious, fraud, wantonness, oppression, or entire want of care that raises a presumption of conscious indifference
vii. Nominal – to cover the cost of action in Georgia
viii. Collateral source rule – admissible to show actual loss in Georgia
ix. Litigation expenses – if (1) bad faith in underlying behavior, (2) stubbornly litigious, or (3) caused unnecessary trouble and expense
C. Equitable Relief
i. Specific performance – for real estate (in Georgia must show tendered money) or unique goods
iii. Seller’s right of reclamation – UCC
1. Buyer insolvent at purchase
2. Demanded within 10 days receipt, AND
3. Buyer still has goods
iv. Buyer’s replevin for identified goods – UCC
1. Seller insolvent within 10 days, or
2. Seller failed delivery of family goods, or
3. Specifically identified goods that buyer can’t cover
IV. Third Parties
i. Intended vs. incidental
ii. Promissory estoppel – third party aware and reasonably relied
iii. Vests if
1. Reasonable detrimental reliance
2. Manifestation of assent
3. Suit filed
i. Transfer of rights
ii. In Georgia – once a party performs, that party may assign rights without consent of the other party and even if the contract says no assignment allowed (except for personal services or special skills contracts)
iii. Multiple assignments
1. If no consideration, last assignment has priority
2. If consideration given, first with consideration has priority
i. If contract allows and no special/individual performance interest
ii. Delegating party still liable under the contract
As our long-time readers know, Mark Cobb serves as adjunct faculty at Thomas University where he has taught Leadership, Management,Economics and most recently Construction Law to upper level students and MBA candidates. He enjoys teaching, working with students, and staying current on legal trends. This fall semester, Mark will be teaching Business Law in the MBA program at TU.
As a Georgia construction lawyer, Mark spends the majority of everyday working in the area of business law. “Construction law,” says Mark, “is business law on steroids! Basically, the contracts are bigger, the number of parties is significantly larger, and the problems very complex. Thus, teaching business law is a natural fit for me.”
Although the semester is only 16 weeks long, the list of topics which Mark intends to cover will challenge his students. As students working toward their MBA, the classroom should be filled with bright, alert students who want to learn. After a quick overview of the American legal system and its court structure, Mark will dive right into the subject of Contract Law. To no ones surprise, this is likely to be one of the most-emphasized sections of the class as they tackle such topics as the following:
- the nature of contracts
- sources of law governing contracts
- noncontract obligations
- bilateral and unilateral contracts
- requirement for a valid offer for a contract
- requirement for a valid acceptance of a contract
- what constitutes consideration
- misrepresentation and fraud
- rescission of contracts
- illegal contracts
- the Statute of Frauds impact on contracts
- parol evidence rule
- third-party beneficiaries under contracts
- performance and breach of contracts
- remedies for contract default
For over 20 years, the world of construction contracting has given Mark a legal and practical application for each of these specialized topics; in addition, and equally important to construction claims, Mark will discuss the concept of personal and real property including construction liens such as subcontractors lien, materialmen’s liens as well as such topics as the following:
- the nature of property
- acquiring ownership of property
- rights and interests in real property
- transfer of property
- landlord and tenant issues (commercial)
- insurance law
- secured transactions
- suretyship and guaranty
- liens on personal property
- security interest in real property
- mechanics and materialmen’s liens
- defaults and foreclosures
- enforcement of lien rights
- commercial papers
- negotiable instruments
- holders in dues course
- good faith in business
- general liability of parties
- agency law
Knowing how and when to structure a business is very important. Some of the MBA students may become entrepreneurs, consultants to industry, or attorneys; thus, Mark’s course will conclude with an in depth look into the law of various business structures including the following:
- creation of partnerships
- operation of partnerships
- dissolution of partnerships
- limited liability companies
- limited partnerships
- limited liability limited partnerships
- the history and nature of corporations
- the organization and financial structures of corporation
- nonprofit corporations
- management of corporations
- shareholder rights and liabilities
- securities regulation
- legal and professional responsibilities of auditors, consultants ands securities professionals
- the Sherman Antitrust Act
- the Clayton Act
- the Robinson-Patman Act
- employment law
- environmental regulation
Utilizing the Socratic method, Mark’s goal is to share with his students an understanding of the practical application of current business law as well as the theories relevant to the changing legal landscape. He plans to draw upon his over 20 years of Georgia construction law experience and resources. “For virtually every topic presented in the textbook, I have seen a real world application which enables me to enlighten the materials with first-hand knowledge. Since our firm helps property owners, general contractors, specialty trade subcontractors and material suppliers, we’ve seen most of the scenarios from multiple perspective which give us an insight other business professionals might not have. We will be able to discuss how to deal with breaches of contract from virtually every perspective.”
The Cobb Law Group is pleased to announce that construction attorneys Mark Cobb and Christopher Thurman will be presenting at an upcoming seminar on Georgia construction law. The course is organized by The Seminar Group and is called Construction Law in Georgia. It will be held on October 1, 2015 in Atlanta, Georgia.
This programs is designed for construction professions who want to mitigate risks on their projects. As the seminar brochure describes,
At this seminar, experienced construction attorneys will teach you how to comply with Georgia’s complex lien laws, how to collect on a judgment, and how to mitigate the harmful risks of bankruptcy. Our experts will also discuss the pitfalls of public construction contracts including government compliance programs and the significant risk of false claims, as well as recent insurance concerns impacting the construction industry.
Anatomy of the Georgia Claim of Lien: Using his decades of experience of filing and enforcing mechanics and materialmen’s liens throughout Georgia, Mark Cobb will begin the first session by presenting Anatomy of a “Claim of Lien” based upon his Georgia Material Supplier Collection Handbook. During this live presentation, Mark will offer practical guidance and useful tips that you can take back to your office and immediately implement. Specifically, he will focus on the following topics which are essential for every lien claimant to know and understand:
- Georgia’s Notice of Commencement–What it is and Common Mistakes During Preparation
- When to Send a Notice to Contractor and Notice to Owner (also sometimes called Notice of Furnishing)
- Essential Elements to Include in a Claim of Lien in Georgia
- Common Mistakes Made When Preparing and Filing Liens
- Advantages of Filing a Lien
- What amounts are lienable
- Lien Enforcement Through the Judicial Process (i.e., foreclosure of liens in Georgia)
- How to Perfect a Lien in Georgia
- What Happens to a Lien After it is Perfected
Project Insurance Needs: Every construction project–whether large or small–has insurance issues, and attorney Christopher Thurman will close the session with his presentation on “Recent Concerns for Everyday Insurance Matters”. He will offer tips and current legal trends regarding the various types of insurance available and how to make certain that you are covered when you need to be. His presentation will include the following topics:
- Sufficient Minimum Coverage
- Certificates of Insurance and Copies of Endorsements
- Additional Insureds
In addition to Mark and Christopher’s presentations, other experienced construction lawyers will present on such important topics as The Nuts and Bolts of Collections, Bankruptcy in the Construction Industry, Immigration Issues, What Contractors Need to Know About Labor & Employment Laws and How to Deal with FLSA Claims, and Public Construction Contract Law Update.
Collecting on a Judgment: Have you ever received a judgment against another party and wanted to collect against that judgment? If so, then the following topics will be covered in this engaging seminar: When and Where to Record a Judgment Obtained Against an Owner, Contractor, Subcontractor, or Supplier; How to Domesticate a “Foreign Judgment” in Georgia; How to Transfer a Georgia Judgment to Another State for Collection; the Most Effective Ways to Collect on a Judgment (including going against bank accounts, the debtor’s other projects, and wage garnishments); How to Discover Assets by Serving Post-Judgment Written Discovery such as Interrogatories and Requests for the Production of Documents, Taking Debtors’ Post Judgment Depositions; Tips for Asset Searches; as well as “Front-End” Planning Tips to Help Ensure a Successful Collections Process.
Bankruptcy & Construction Law: During the Great Recession, bankruptcy impacted many construction projects, and the seminar covers topics such as: How Does a Debtor’s Bankruptcy Filing Impact my Claim for Payment? What Happens to My Judgment if Bankruptcy is Filed? Can I Pursue Payment in Bankruptcy Court? Strategies and Tactics for Collecting “Around” the Bankruptcy Court; How to Deal with Lying, Cheating or Stealing in Bankruptcy (including fraudulent transfers of assets)?
Immigration & Construction Issues: Georgia’s construction industry is fraught with immigration minefields, and this topic will help educate and answer employers’ questions including the following: Does E-Verify Apply to the Construction Industry? Are There Legal Ways to Employ Undocumented Workers on a Construction Project? What are the Penalties for Using Undocumented Workers? Can Construction Workers in Georgia Obtain Work Visas? What if a Construction Worker has Children Born in the U.S. – Does That Impact His or Her Status?
Employment Law & Construction: Keeping a job site safe and secure requires a great deal of knowledge and work. At the seminar, business owners will learn about such vital issues as: Maintaining a Diverse Workforce Free from Harassment, Discrimination, and Retaliation; Accommodating Employees with Disabilities; Dealing with Family, Medical, and Military Leave Issues; Understanding the National Labor Relations Board’s Broad View of “Protected Concerted Activity;” and Applying the Fair Labor Standards Act to the Construction Industry.
Current Law: New laws are always being passed by the legislatures and administrative agencies, and older laws are being interpreted by courts and tribunals. Thus, the presentation current issues in construction law will cover such topics as New Federal Regulations Impacting the Construction Industry, Recent Georgia Legislation; The Who/What/When of Bid Protests; False Claims; Regulatory Compliance Programs; as well as a thorough Case Law Update on interpretations and changes to existing laws.
Continuing Education Accreditation: This course has been approved by the Commission on Continuing Lawyer Competency of the State Bar of Georgia for mandatory continuing legal education credit in the amount of 6.1 regular hours. This course has been approved by The American Institute of Architects for 6.25 LU’s. The Seminar Group is an AIA CES Approved Provider. This course has been approved by the IRMI for 7.0 hours of CRIS reaccreditation credits. Contractors and engineers may qualify for continuing education hours through the American Institute of Constructors or the Construction Management Association of America.
For more information about this incredible seminar on Georgia’s Construction Law, Mechanics Liens, Materialmen’s Liens, and related issues, please click here > >