Contract Drafting and Negotiation

Issue

The cost and time to perform change order work may increase as a result of COVID-19 impacts that arise after the change order is agreed upon. The Contractor can include contingencies for that risk in its lump sum pricing, but the Owner will have paid an unnecessary premium if those impacts do not materialize.

Proposed Solution

Consider utilizing a COVID-19 Rider with your change orders. The Rider details the types of COVID-19 impacts that entitle the Contractor to relief, as well as the specific relief. This allows the parties to use their standard process and format for change orders, with the COVID-19 issues addressed in the Rider. A one-page Rider is often all you need. The primary issues to address in the Rider are discussed below.
Continue Reading COVID-19 Riders for Construction Change Orders

In heavy-civil, excavation, and infrastructure work, the risk of encountering differing, unknown, or concealed conditions is significant, as it is nearly impossible to document or predict everything that the contractor will encounter below the surface when performing its operations. Although standard pre-bid site surveys, including soil and geotechnical reports, are good resources to evaluate potential concerns, they will almost never be all encompassing as to what a contractor will face when its work is in progress. Given these unique, complicated, and costly risks, some project owners will seek to pass liability for such risk onto the those performing the work. Indeed, owners may seek to transfer these unknown risks, including unforeseen conditions, to contractors making the financial burden significant for those bidding the work. Accordingly, it is imperative that the contractor balance the desire to submit a competitive price to win the work with the need to ensure that it has some type of remedy or recovery should it encounter such concealed or differing conditions. Faced with this balancing act, contractors performing excavation and foundation work should be intimately familiar with the site disclaimer, exculpatory, and risk-transferring clauses present in their agreements and the effect that such provisions may have on their ability to recover additional costs and time should they encounter differing conditions.
Continue Reading Construction Site Disclaimers: Navigating Risk Allocation for Differing, Concealed and Unknown Conditions in Heavy-Civil, Excavation, and Infrastructure Work

Thursday, October 7, 2021
1:00 p.m. to 2:00 p.m. Eastern
12:00 p.m. to 1:00 p.m. Central
11:00 a.m. to 12:00 p.m. Mountain
10:00 a.m. to 11:00 a.m. Pacific

Register Here

Real estate developers face numerous pandemic-related challenges. In this webinar, we will discuss how developers are changing the terms of their loan agreements, construction contracts,

On September 23, 2021, James Newland, AIA, partner in Seyfarth’s Construction group, will be a panelist on the program: “Developing High Performance Structures Through Integrated Project Delivery (IPD),” presented by the Construction Management Association of America (CMAA).

The program features participants from DPR Construction and HKA Consulting and will address key aspects of the (IPD)

Potential Damages

Potential damages arising from the failure to achieve statutory or contractual requirements concerning Leadership in Energy and Environmental Design (LEED) or other green building standards are far ranging and may include: fines, loss of financing or tax incentives, loss of tenants, decreased building value, decreased worker productivity, and increased utility costs.

Direct v. Consequential Damages

Damages are often characterized as direct or consequential. Generally speaking, direct damages are foreseeable and naturally and ordinarily follow the breach, whereas consequential damages are unforeseeable to the breaching party and result from special circumstances. For example, if you were in a car accident, the damage to your car and medical expenses to treat whiplash would be direct damages. If you were on your way to a job interview and lost the job because you missed the interview due to the accident, the lost wages would likely be consequential damages. In our context, a fine arising from the failure to achieve a statutory LEED requirement, such as Silver certification, is probably a direct damage. However, the loss of revenue due to tenants who back out of leases because the building is not LEED certified may be a consequential damage.
Continue Reading Contract Drafting Tip: “LEED” Damages and the Waiver of Consequential Damages Clause

Seyfarth partner David Blake authored “COVID-19 Language for New Construction Contracts,” published by GlobeSt.com on August 24, 2020. In the article, David addresses custom COVID-19 language for new construction contracts. The article is based on two construction contracts for which David successfully drafted and negotiated custom COVID-19 language. One is a private project

On August 26, 2020, James Newland, AIA, partner in Seyfarth’s Construction group, along with Andrew McCoy, Ph.D., Professor and Associate Director of the Myers-Lawson School of Construction at Virginia Tech, will present the a free Lunch and Learn program: Construction Risk Management, Changes, Delays, Inefficiency, and Claims.

The program is free of charge and

Introduction

Those entering into new construction contracts should include custom language addressing the parties’ respective rights and responsibilities related to COVID-19. Many articles and webinars have focused on how traditional contract clauses in existing contracts may respond to COVID-19 issues. The fit is not always clear. Some guesswork is involved and creativity is called upon as square pegs are coaxed into round holes. While there is a need to perform that retrospective analysis to assess how COVID-19 issues will play out under existing contracts, there is no need to propagate uncertainty in new contracts. Indeed, such uncertainty can cause parties to shy away from new contracts or include significant contingencies, neither of which supports an industry trying to recover from the pandemic.

This article addresses custom COVID-19 language for new construction contracts. The principles discussed can be applied to any construction contract. This article is based on two construction contracts for which I successfully drafted and negotiated custom COVID-19 language. One is a private project and the other is a public project. Some of the views expressed during those negotiations are weaved into the discussion to provide both sides’ perspective.
Continue Reading COVID-19 Language for New Construction Contracts: A Practical Approach

Force Majeure, Commercial Impracticability, and Frustration of Purpose

The outbreak of COVID-19 has been one of the most disruptive events to the global economy in recent memory. Businesses across every sector of the economy are scrambling to determine the legal repercussions of government travel restrictions, labor shortages, supply chain interruptions, financing impacts, and market price

For projects that involve excavation or foundation work, even the most diligent pre-bid site survey may not fully inform the contractor of what conditions to expect below the surface. The risks of encountering unforeseen subsurface conditions are so high that, rather than encouraging bidders to include large contingencies in their proposals, construction lawyers have drafted a special clause—the Differing Site Conditions clause. The purpose of the Differing Site Conditions clause is to allocate the risk for conflicting, inaccurate, or incomplete pre-bid information furnished by the project owner. While the Differing Site Conditions Clause should, in theory, be a pile driver’s closest ally, recent cases interpreting this clause highlight some of the challenges to prosecuting claims under this provision.
Continue Reading What Lies Beneath (And Who Pays for It?): Common Issues Arising Under the Differing Site Conditions Clause