Articles & Insights

Federal public work construction projects are unique in that there are no Stop Payment Notice or Mechanics Lien remedies available. Furthermore, although a remedy is available by proceeding against the original contractor’s payment bond under a federal law known as the “Miller Act” and its corresponding Federal Regulations (40 USCS 3131 et seq. and 48 CFR 28.101-1 et seq.), this remedy is not available to all subcontractors or suppliers. In addition, there are circumstances where a different form of security can be substituted for the payment bond (40 USCS 3131(b)(2)).

It is an all-too-common scenario in California construction: Nine and a half years after completion of a major California construction project, immediately before the 10-year “statute of repose” for suing on “latent” construction defects expires, a lawsuit claiming damages for “recently discovered” latent construction defects is filed. The property owner sues the contractor for the alleged defects. The direct contractor sues all its subcontractors for indemnity and defense. The attorneys spontaneously generate. Experts proliferate. Claimed defects are extrapolated. Four or five years later, after a few dozen attorneys earn a small fortune in fees, the insurance companies make payments. Attorneys collect more fees. The owners take what remains. They repair nothing… and buy vacation homes.

Certain phrases in our language originated as legal concepts. “Ready, willing and able” and “acts of God” are examples. Another such phrase is “Time is of the essence.” What is the legal significance of including this phrase in a contract?

This is a follow-up to my August 2008 article advising that, based on a series of recent cases, California courts would be entitled to order any building contractor or subcontractor who performed construction work with a contractor’s license that was suspended during part of the project to refund all sums the contractor was paid for all work on the entire project. This rule would apply not only to work performed by the contractor while the license was suspended, but also to work performed while the license was properly in place. This follow up article is to inform you that the Sacramento Superior Court has clearly adopted this doctrine.

The above title would tend to trigger a “double take” and at least a few questions: Did I read that correctly? Do you mean that if my contractors’ license is suspended at any point during a construction project, I could be required to repay every penny I received for my work throughout the entire project? Even for work done while my license was properly in place? Contractors and Subcontractors may be surprised to learn that the answer to all of these questions is “Yes.” Here is why…

Any owner or general contractor who has a few projects under his or her belt has likely had this thought: “My contractor (or subcontractor) is not performing the way I expected; should I replace him?” The other side of the termination coin is: “This project is not going the way I expected; should I get out?”

While there may be an emotional high that immediately comes from terminating a contractor or subcontractor (or leaving a project, in mid-stream), there are many factors to be weighed, before making that decision.

In virtually every complex construction project, the general contractor will submit a competitive bid for the work, and in doing so will rely on underlying bids from prospective subcontractors in particular trades. One of the enduring legal issues in this scenario is the justifiable reliance that a bidding general contractor places in a subcontractor’s bid. If the general uses the sub’s bid, does that automatically lock in the price stated by the subcontractor? What about the other items that may be buried within the subcontractor’s bid? A recent decision from the court of appeal sheds much needed light on these issues.

Recent years have seen an explosion of mold litigation with the publication of several multimillion dollar jury verdicts in toxic mold lawsuits. While large plaintiff’s verdicts are well publicized, defense verdicts in mold cases rarely, if ever, receive public notice. Prior to 2000, relatively few mold claims were pursued, and claims were routinely settled for nominal amounts – $5,000 or less. Since then highly publicized seven and even eight figure jury verdicts have led to a proliferation of mold litigation. U.S. insurers paid $1.3 billion in mold-related claims in 2001 and more than $3 billion in 2002¹ Medical opinion on mold related disease is evolving, and many mold injury cases are pursued without solid medical or scientific support.