Tag Archives: Massachusetts construction lawyer

Forfeiture Rule in Construction Disputes Under Review by the Massachusetts Supreme Judicial Court

By on March 6, 2018

Since the early 1900’s, Massachusetts courts have held that a contractor cannot recover on the contract itself without showing complete and strict performance of all terms or, in the event the contract cannot be completed fully, that the contractor substantially performed and attempted, in good faith, to perform fully. Under this rule, if the court finds that the contractor intentionally departed from the specifications of the contract, the contractor is prohibited from recovering under the contract, forfeiting its right to contract damages. 

The Massachusetts Supreme Judicial Court (SJC) will hear arguments this week requesting the forfeiture rule in construction cases to be overturned. The appellant in G4S Technology LLC v. Mass. Tech. Park Corp., SJC-12397, appeals a prior summary judgment ruling, wherein the trial court denied the contractor’s claims for approximately $10 million in delay-and-impact damages on the basis of the forfeiture rule. Despite ultimately completing the project, it was determined that the contractor paid some of its subcontractors late and submitted false certifications. Those actions were in breach the contract, and the trial court determined that those actions were sufficient to deny the contractor’s claims.

The SJC will consider whether Massachusetts should adopt an alternative standard that considers whether a breach was an uncured, material breach that alleviates the non-breaching party’s obligation to pay and weigh a breaching party’s lack of good faith or willfulness, among other factors to be considered by the court. This multi-factor analysis is applied currently by Massachusetts courts in other contract disputes, but not in connection with construction disputes.

Should the forfeiture rule be overturned, it would have wide-reaching consequences and create greater flexibility in arguing an entitlement to damages on breach of contract claims. Contractors would be wise to keep track of this case as it proceeds. If you have questions concerning your rights in connection with a construction dispute, consult an experienced Massachusetts construction attorney.

OSHA Injury Tracking Application Enforcement Delayed to December 15, 2017

By on December 8, 2017

The Occupational Safety and Health Administration (OSHA) recently extended, for the second time, the enforcement deadline for compliance with electronic reporting of injury and illness data through its Injury Tracking Application (ITA) until December 15, 2017.

The new rule took effect January 1, 2017, and required certain employers to submit injury and illness information electronically through the new tracking application.  The information required to be submitted to OSHA remains largely unchanged from the information already required to be kept under current regulations.  In other words, the primary difference is that it must be submitted through the ITA rather than through traditional methods.

In late November, the deadline was pushed back again to December 15, 2017.  Despite the second delay in enforcement it appears that the rule will eventually begin enforcement, even amid speculation that the rule might be scuttled entirely.  For the time being, construction employers should be prepared to submit their 300A and related forms electronically for years 2016 and forward electronically by December 15, 2017 to insure compliance with the new rule and avoid exposure to citations.

Home Improvement Contractor Denied Damages for “Reasonable Value” of Completed Work

By on October 18, 2017

Damages for work performed under a construction contract may be awarded under a variety of legal theories. One such theory is the principle of quantum meruit, which, when established, allows for an award of the reasonable value of goods or services as compensation for the value of “enrichment” those goods or services provide. Generally, one must demonstrate both good faith and substantial performance in order to recover on the theory of quantum meruit.

Recently, the Massachusetts Appeals Court reversed an award of damages on a quantum meruit claim after homeowners terminated their contract prior to completion of work.

In Pinecone Construction, Inc. v. Sridhar, the trial court awarded quantum meruit damages to a contractor, reasoning that while the contractor’s work intentionally departed from the contract specifications, the work was “structurally sound” and was used in completing the project.  As a result, the court concluded that “equity demands” that the contractor recover the value of its labor and materials provided prior to termination. On appeal, the Appeals Court reversed, determining the trial court’s reasoning to be circular, and held that as a matter of law a contractor cannot recover quantum meruit damages without showing both good faith and substantial performance, without regard to any benefit or enrichment conveyed to the homeowners.  Because the trial court found the contractor’s intentional departure from contract specifications tantamount to bad faith, the damages award was overturned and the homeowners were separately awarded damages for the cost of completion and under the Massachusetts Home Improvement Contractor Act and Mass. Gen. Laws Chapter 93A.

While Pinecone Construction is an unpublished opinion, it should stand as a cautionary tale to contractors – failure to perform work in good faith can bar even equitable recovery for work performed.  If you have questions regarding your ability to recover damages for your work on a home improvement contract or other construction work, you should contact an experienced construction lawyer to determine your rights and assess your potential remedies.

Show Me the Money: Getting Paid on Private Massachusetts Construction Projects

By on March 15, 2017

As a general rule, parties to private contracts are afforded wide latitude to dictate and negotiate the terms as they see fit. While this notion of “freedom of contract” is an entrenched tradition within American law it is not without its limitations.  The Prompt Pay Act, enacted in 2010, is one such limitation that every Massachusetts sub-contractor and contractor should have an acute awareness of.

In effect the Prompt Pay Act requires that standard state provisions be incorporated into otherwise private construction contracts with an original valuation of over three million dollars. The Prompt Pay Act specifically affects the interpretation of payment clauses in such contracts.

As a reminder, “pay-if-paid” clauses create a condition precedent to subcontractor payment. That is, a subcontractor has no right to payment for completed work until the general contractor has received payment from the owner. “Pay-when-paid” clauses create no such condition precedent to subcontractor payment. Rather, the general contractor has a ‘reasonable time’ to obtain payment from the project owner, but in the event the owner does not pay the general contractor within the ‘reasonable time’ the subcontractor still has the right to seek payment from the general contractor. Ambiguous contract language often complicates the subtle, yet substantial, differences between the two types of clauses leading to high stakes contract interpretation disputes.

In 2004, Massachusetts did away with distinction between “pay-if-paid” and “pay-when-paid” clauses on state-level public construction projects.  Framingham Heavy Equip. Co., Inc. v. John T. Callahan & Sons, Inc., 807 N.E.2d 851, 855 (Mass. App. 2004). Thus with regard to Massachusetts state-level public construction projects “pay-if-paid” causes have been effectively eliminated in favor of “paid-when-paid” clauses.”

Federal-level public construction projects, on the other hand, have not completely eliminated the distinction between “pay-if-paid” and “pay-when-paid” contract clauses. On federal-level public construction projects “pay-if-paid” language included in a subcontract could complicate subcontractor recovery in relation to the principal contractor. The limited amount of Federal case law on the issue, however, leads to the inference that Federal Courts disfavor allowing “pay-if-paid” clauses to operate in the federal-level public construction context.

The Prompt Pay Act directs that, on private construction projects valued at over three million dollars, payment clauses be interpreted as “pay-when-paid,” thus effectively eliminating “pay-if-paid” in most instances. Specifically, and with very narrow exception, “[a] provision in a contract for construction which makes payment to a person performing the construction conditioned upon receipt of payment from a third person that is not a party to the contract shall be void and unenforceable.” MGL c. 149 sec. 29E (e).

This statutory language is a clear attempt, in the name of the broad public interest, to provide protections to subcontractors by endeavoring to ensure swift payment for work provided in order to keep construction projects moving and companies afloat by regulating cash flow.

Smith Ironworks, Inc. v. Torrey Co., Inc., Not Reported in N.E.3d (2014), is the only Massachusetts case to discuss the Prompt Pay Act at any length. Even so, it is an arbitration decision as discussed in Smith, and not the Court itself, that provides the limited interpretation of the Act. In Smith, the subcontractor applied for payment from the contractor for work provided on a private project. Disputes as to the actual amount owed existed, however, rather than actively reject the request for payment, the contractor did not respond at all. Pursuant to the terms of the Prompt Pay Act the request for payment was deemed approved after the statutorily prescribed time passed without formal rejection. The parties submitted to voluntary arbitration and an arbitrator found that the contractor was liable to the subcontractor for the amounts submitted, plus interest, as the contractor failed to properly respond to the request for payment as prescribed by the Prompt Pay Act. The contractor was deemed liable even though it had not been paid in full by the owner.

To reiterate, while Smith details an outcome favorable to a subcontractor by application of the Prompt Pay Act, that outcome is not of true precedential value. Questions remain as to the effectiveness of the Prompt Pay Act. Specifically, questions regarding the true parameters and enforceability of payment timelines and the exact remedy for non-compliance. Thus, subcontractors should keep an eye towards the development of the law in this area and strive to understand how the Prompt Pay Act may apply to various projects. If you have any questions about payment issues on public construction projects you should contact a Massachusetts construction lawyer.

Understanding the Limitations of Chapter 93A – Pursuing Litigation Is Not Unfair or Deceptive

By on February 26, 2017

Companies operating or conducting business in Massachusetts are aware of an all-too-familiar statute, Massachusetts General Laws Chapter 93A. This statute provides individual consumers and businesses a right to bring legal action if they are harmed by an unfair business practice. The statute eloquently, although perhaps ambiguously, states that a violation shall exist when a company commits an “unfair or deceptive act or practice, or unfair method of competition,” against another who is engaged in commerce within the Commonwealth.  Violations can cover a litany of topics, such as a company that unfairly demands more money to complete its contract obligations after having already executed the contract (Anthony’s Pier Four, Inc. v. HBC Associates, 411 Mass. 451), or where insurance providers fail to offer a fair and equitable settlement amount within the required time period (Rhodes v. AIG Domestic Claims, Inc., 461 Mass. 486), or against landlords who fail to provide habitable units to their residential tenants (Haddad v. Gonzalez, 410 Mass. 855).  Although Chapter 93A is far-reaching, it does have its limitations.

Recently, Strang Scott attorneys Cole Young and Jennifer Lynn argued to the Massachusetts Appeals Court that litigation tactics alone are not unfair or deceptive acts or practices, such that they violate Chapter 93A.  Agreeing, the Appeals Court held that demanding payment under a contract, filing suit, and continuing to litigate a claim over a disputed amount is a simple contract dispute and nothing more. Aggregate Industries ­– Northeast Region, Inc. v. Hugo Key & Sons, Inc., 90 Mass.App.Ct. 146 (2016).   Said another way, the Appeals Court held that plaintiffs should not be punished for deciding to litigate, rather than accepting a lower settlement amount.  The Appeals Court went on to hold that the unfair or deceptive practice must arise from an independent act of trade or commerce, “not tangentially from litigation concerning that conduct.” 

The precedent of this case will be far-reaching and provides security to companies and businesses who choose to file suit, as opposed to being forced into settlement for fear of committing an “unfair” act.  Because the breadth of Chapter 93A can be complicated and nuanced, potential litigants should speak with an experienced Massachusetts litigator.

Show Me the Money: Getting Paid on Federal Public Construction Projects

By on July 18, 2016

It is imperative that subcontractors and material suppliers seeking payment for completed work on federal-level public construction projects be aware of the paradigm of laws and policies that exist governing such matters. To start, The Miller Act, codified as 40 U.S.C. §§ 3131-3134, exists to provide subcontractors on federal-level public construction projects a means by which to secure their right to payment in an analogous manner to how M.G.L. c. 149, § 29 operates to provide Massachusetts subcontractors and material suppliers on state-level public construction projects a means by which to secure the same. Specifically, the Miller Act requires general contractors on federal projects to provide performance bonds and payment bonds to the awarding authority where the prime contract exceeds $100,000. (for a comprehensive overview of subcontractor Miller Act rights see, “Federal Subcontractors – Understanding the Basics of Your Rights Under the Miller Act.”). 

While the legal framework behind federal-level public construction projects and state-level public construction projects often operate in tandem it is imperative to note that Federal law and Massachusetts law treat the enforceability of “pay-if-paid” and “pay-when-paid” subcontract clauses somewhat differently. This distinction is one that subcontractors need be wary of when entering into public construction contracts.

“Pay-if-paid” clauses create a condition precedent to subcontractor payment. That is, a subcontractor has no right to payment for completed work until the general contractor has received payment from the owner. “Pay-when-paid” clauses create no such condition precedent to subcontractor payment. Rather, the general contractor has a ‘reasonable time’ to obtain payment from the project owner, but in the event the owner does not pay the general contractor within the ‘reasonable time’ the subcontractor still has the right to seek payment from the general contractor. Ambiguous contract language often complicates the subtle, yet substantial, differences between the two types of clauses leading to high stakes contract interpretation disputes.

In 2004, Massachusetts did away with the fraught distinction between “pay-if-paid” and “pay-when-paid” clauses on state-level public construction projects. See, Framingham Heavy Equip. Co., Inc. v. John T. Callahan & Sons, Inc., 807 N.E.2d 851, 855 (Mass. App. 2004). Thus with regard to Massachusetts state-level public construction projects “pay-if-paid” causes have been effectively eliminated in favor of “paid-when-paid” clauses.” 

Federal-level public construction projects, on the other hand, have not completely eliminated the distinction between “pay-if-paid” and “pay-when-paid” contract clauses. Thus, on federal-level public construction projects “pay-if-paid” language included in a subcontract could complicate subcontractor recovery in relation to the principal contractor. The limited amount of Federal case law on the issue, however, leads to the inference that Federal Courts disfavor allowing “pay-if-paid” clauses to operate in the federal-level public construction context, particularly on Miller Act projects.

According to Federal Courts in both the First and Ninth Circuits, “the Miller Act is ‘highly remedial in nature,’ and should be construed and applied liberally to ‘effectuate the Congressional intent to protect those whose labor and materials go into public projects.’” United States ex rel. J.H. Lynch & Sons v. Travellers Cas. & Surety Co. of Am., 783 F. Supp. 2d 294, 296 (D.R.I. 2011) quoting, United States ex rel Walton Tech., Inc. v. Weststar Eng’g, Inc., 290 F.3d 1199, 1209 (9th Cir. 2002). Furthermore, according to the reasoning of the Ninth Circuit, because the Miller Act itself conditions payment, not on whether prime contractor is paid, but rather, whether the subcontractor has performed AND whether the statutory amount of time to bring a Miller Act claim has passed, it then follows that the terms of the Miller Act trump subcontract “pay-if-paid” language absent a “clear and explicit” waiver on the part of the subcontractor. Of particular note, the Ninth Circuit, specifically states, and the District Court of Rhode Island, located in the First Circuit, specifically quotes, the following language; “A subcontractor that has performed as agreed need not await the Government’s payment of the contractor before initiating an action under the Miller Act against the contractor or the surety.” United States ex rel Walton Tech., Inc. v. Weststar Eng’g, Inc., (9th Cir. 2002); United States ex rel. J.H. Lynch & Sons v. Travellers Cas. & Surety Co. of Am., (D.R.I. 2011).

The law is far from settled regarding the enforceability and distinction between “pay-if-paid” and “pay-when-paid” subcontract clauses on federal-level public construction projects. While there is some guidance on this issue in the context of the Miller Act, the distinction between the two clauses may still prove thorny for subcontractors seeking to enforce their right to payment.  Thus, subcontractors should keep an eye towards the development of the law in this area as it is likely that more distinct legal trends will begin to emerge. If you have any questions about payment issues on public construction projects you should contact a Massachusetts construction lawyer.