On Thursday, January 19, construction law area chair + attorney Don Gregory presented a seminar on minimizing your risk and avoiding legal problems. This seminar discussed contract language, conditional bids, and killer contract clauses such as contingent payment, no damage for delay, waiver of lien + bond rights, and unconditional lien waivers before payment.

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MINIMIZING
Your Risk +
AVOIDING
Legal Problems
Presented by Don Gregory
January 19, 2017

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TOP RISKS
in Today’s Construction
1 Labor Shortage
30%
2 Contract Language
22%

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Conditional
BIDSYour first – and
perhaps last – chance
to make the rules.

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Did You Condition Your Bid?
This bid is conditioned upon
the use of the ConsensusDOCS
750, AIA A401 or other
subcontract language
acceptable to subcontractor
“
“

5. z
Use ASA bid proposal form or
similar language:
Favorable Conditions of
Proposal:
+ Beginning work constitutes acceptance of bid
+ Change in material price by 5% or more
warrants equitable adjustment
+ Not required to name additional insureds
+ Favorable payment terms

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Use ASA bid proposal form or
similar language:
Favorable Conditions of
Proposal:
+ Entitled to equitable adjustments for
modifications to schedule, delays outside
sub’s control
+ Entitled to rely on contract documents
+ Lien waivers exclude retainage and unbilled
changes/claims

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Conditional
BIDSCan be incorporated into
the Subcontract scope
(attach as exhibit A)
OR
Retain leverage for
subcontract revisions

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Securing Equitable
CONTRACT TERMS

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Killer Contract Clauses
Contingent
Payment
No Damage
for Delay
Waiver of Lien
+ Bond Rights
Unconditional
Lien Waivers
Before
Payment

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Killer Contract Clauses
Contingent
Payment
No Damage
for Delay
Waiver of Lien
+ Bond Rights
Unconditional
Lien Waivers
Before
Payment

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Contingent Payment
Pay-If-
Paid
Pay-
When-
Paid

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“Condition precedent”

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Progress
Payment

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Final
Payment

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To be enforceable, must
be clear + unambiguous
Pay-If-
Paid

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If not drafted correctly, “benefit of
the doubt” will go to subcontractor
Pay-If-
Paid

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Unenforceable by statute in:
WI SC
DE

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Why have a mechanic’s
lien statute when it can
be defeated with a
Pay-If-Paid clause?

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Lehrer McGovern
Bovis, Inc. v. Bullock
Insulation, Inc.
Lien waiver and pay-if-paid
provisions are unenforceable based
upon public policy favoring the
statutory right to a mechanic's lien

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Paid within a reasonable period of time
Pay-
When-
Paid

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If owner fails to pay, payment on demand
Pay-
When-
Paid

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Practical Pointers
Look for contracts with
good payment terms
(Fixed payment terms, pay-when-paid)
Try to Insert Pay-When-
Paid Language
(Use AIA A401 or ConsensusDOCS 750)
Modify Pay-If-Paid
Language

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Killer Contract Clauses
Contingent
Payment
No Damage
for Delay
Waiver of Lien
+ Bond Rights
Unconditional
Lien Waivers
Before
Payment

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Not Enforceable
Under Ohio’s Fairness
in Construction
Contracting Act

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Sole remedy is a
time extension
Generally unenforceable if –
statute/case considers it against
public policy or extent or nature
of delay was not foreseeable

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Killer Contract Clauses
Contingent
Payment
No Damage
for Delay
Waiver of Lien
+ Bond Rights
Unconditional
Lien Waivers
Before
Payment

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Contrary to popular belief,
in many states an
“upfront” lien wavier
(without independent
consideration like payment)
is ENFORCEABLE

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Lien
Waiver
Language

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Killer Contract Clauses
Contingent
Payment
No Damage
for Delay
Waiver of Lien
+ Bond Rights
Unconditional
Lien Waivers
Before
Payment

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Condition your lien
waiver … followed by a
trailing unconditional
lien waiver
SOLUTION

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Conditional
Waivers
Use Conditional Waivers
for Progress Payments

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Signing
Waivers
Be Careful When Signing
Waivers for Partial
Payment

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Proper
NOTICE
Nobody likes it
Everybody needs it

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Change Orders
IN WRITING
Avoid provisions that:
allow one to direct additional
work without agreement on price
make payment for additional work
contingent upon payment by owner
allow “backcharges” without notice
(ConsensusDOCS 750)

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Proper
Notice
Risk of Proceeding
Without Change Order
or Written Direction

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Would love to perform the
work without delay, but
YOUR contract makes me
stop to get a change order
signed in advance!

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LANGUAGE
To Protect Yourself
“Unless you indicate otherwise, we
will proceed with the additional work
as we were directed in the progress
meeting earlier today and this e-mail
shall serve as continued notice of our
intention to receive additional
compensation for this change”

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Don’t get burned by
signing a change
order with broad
waiver language

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BE CAREFUL
When Signing Change Orders
Change Orders should just waive
costs for that specific change rather
than all possible extra costs through
the date of the change order

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Questions?
Donald W. Gregory, Director
Kegler Brown Hill + Ritter
dgregory@keglerbrown.com
keglerbrown.com/gregory
614-462-5416