Construction Law Tips with Seth Meyer

One of the most crucial aspects of construction law is dispute resolution. Seth Meyer articulates that disputes in construction can either go to court or be resolved through arbitration, a private mechanism where experienced professionals hear the dispute. Arbitration is often preferred in the construction industry for several reasons:

1. Efficiency: Arbitration is typically quicker than navigating the court process, which can be prolonged and cumbersome.

2. Expertise: An arbitrator with specific knowledge of construction disputes can provide more insightful resolutions.

3. Flexibility: The laws applied in arbitration are generally more loosely interpreted compared to strict court rules, making it easier for parties to focus on resolving the core issues.

Meyer emphasizes the benefit of incorporating mediation before arbitration. Mediation acts as a preliminary step where parties can negotiate and potentially settle disputes without the need for formal proceedings. This approach can save both time and resources while preserving professional relationships.

One of Meyer's key pieces of advice is the habitual procurement and submission of signed change orders. Procrastination in handling change orders can lead to significant disputes and financial repercussions. Change orders document any alterations to the original project scope and provide a legal basis for additional time or costs incurred. By ensuring these are signed daily, contractors can safeguard themselves against claims and disputes later on.

More tips from Jerry about managing change orders can be found by clicking here.

Given the intricate nature of the construction business, Aliberti and Meyer discuss the necessity of having well-staffed risk and compliance departments (depending on size of company). These teams are vital for ensuring that all subcontractors' actions are compliant with both contractual and insurance requirements. A robust compliance program helps in avoiding unexpected liabilities and maintaining smooth project progress.

Contracts form the backbone of any construction project, and having strategically crafted clauses can protect parties from various risks. Meyer highlights important contract provisions, including:

1. Payment Clauses: Holding back payment in case of a claim can incentivize timely and proper performance.

2. Notice Provisions: Clear requirements for notices about delays, change orders, and disputes.

3. Indemnification Clauses: Properly transferring and sharing risk to protect against workplace injuries and ensure appropriate insurance coverage.

4. Scheduling and Liquidated Damages: Provisions related to manpower, scheduling, and the application of liquidated damages fees for delays. It's essential to document delays meticulously, whether they are due to submittals, revisions, or change orders, to prevent excessive fees.

Meyer advocates for the early involvement of legal professionals in construction projects. This proactive approach can help in various ways, including:

1. Crafting Initial Documents: Lawyers can assist in drafting initial letters and communications to ensure they meet legal standards and protect the contractor’s interests.

2. Early Communication: Including a lawyer as a CC on email communications can encourage cautious and legally sound decision-making.

3. Project Kickoff: A thorough kickoff meeting involving good estimators and project teams can preemptively tackle potential change orders and compliance issues.

Payment delays are a pervasive problem in the construction industry. Contractors and subcontractors often face cash flow difficulties due to late payments, which can escalate into disputes, lien threats, bond claims, and bad debt. Meyer explains that common issues include:

1. Delayed Payments: Payments not made on time put a strain on all parties involved.

2. Back Charges Disputes: Disagreements over charges for additional work or corrections.

3. Unpaid Change Order: Additional work documented via change orders but unpaid.

4. Project Specifications Issues: Misunderstandings or disputes regarding project specifications causing payment delays.

Filing a lien, though a delicate decision, is a tool that can sometimes open dialogue between parties and resolve payment disputes. However, caution must be exercised to maintain professional relationships.

For minority-owned businesses or Disadvantaged Business Enterprise (DBE) and Women-Owned Business Enterprise (WBEs), certification is pivotal. Meyer underlines the intricate process of obtaining and maintaining such certifications:

1. Ownership and Decision-Making: At least 51% ownership is mandatory, with the need to show involvement in decision-making processes.

2. Project Leadership: Demonstrating the capacity to lead and manage projects.

3. Document Preparation: Lawyers can help prepare necessary documents, resumes, and interview preparations.

Subcontractors must align their certifications with their work codes, possess adequate insurance, and maintain the capacity to handle the opportunities that come with certification.

Ensuring timely and full payment to workers is another critical aspect. Failure in this area can result in punitive actions and liquidated damages. Meyer explains that subcontractors must be vigilant about payroll obligations to avoid severe repercussions.

Proper indemnification clauses facilitate the appropriate transfer and sharing of risk. This is especially significant in preventing disputes related to workplace injuries. Comprehensive insurance coverage aligned with these clauses is essential for all parties in the chain.

When disputes arise over owed money, compensable delays, or liquidated damages, mediation and arbitration serve as the final steps in resolving disagreements. Meyer's advice underscores the importance of these mechanisms in achieving fair resolutions without resorting to prolonged court battles.

Bonding plays a crucial role in public projects, ensuring both payment and performance. Maintaining solid relationships with bonding companies and understanding bonding capacity is pivotal for successfully bidding on larger projects.

In the ever-evolving landscape of construction, staying proactive, informed, and legally savvy can make the difference between a project's success or failure. Whether it's resolving payment disputes, managing change orders, or ensuring compliance, Meyer's expertise sheds light on how to effectively handle these critical issues.

For those seeking to dive deeper into construction law, the full episode of "Construction Law Tips by Seth Meyer" on the "Pro-Accel" podcast is a must-listen. By leveraging legal expertise and being proactive, construction professionals can safeguard their interests and steer their projects to successful completions.

To book a Free Consultation with owner Jerry Aliberti and discuss your company's growth plans and/or challenges email jerry@pro-accel.com or click on the "Schedule a Call with us" button below and schedule directly.