Tag Archives: suppliers

Strang Scott Prevails In Arguing that Public Awarding Authorities Have a Duty to Verify Validity of Payment Bonds

By on January 21, 2016

A Superior Court judge recently ruled in Kapiloff’s Glass, Inc. et.al. v. University of Massachusetts (UMASS), et.al., MICV2014-08766, that Massachusetts awarding authorities on public construction projects do, in fact, have a duty to confirm that the payment bonds submitted by general contractors are valid.

Strang Scott brought suit on behalf of four subcontractors who provided labor and materials on the University of Massachusetts at Lowell Dry Lab Renovations construction project. The general contractor failed to pay the subcontractors in full, so the subcontractors requested copies of the payment bond from the awarding authority. Soon after filing suit, the subcontractors learned that the general contractor was filing for bankruptcy, and that the payment bond was fake.

As discussed in a previous article, Strang Scott, in a case of first impression, argued that awarding authorities on public construction projects have statutory obligations under M.G.L. c. 149, s. 29 to verify that the payment bonds provided to them by general contractors are legitimately issued by sureties registered with the Massachusetts Division of Insurance. The University of Massachusetts argued that it was not an officer or agent of the Commonwealth within the meaning of the statute. The court ruled that this defense was “neither logical nor in accord with common sense.”

The court decision explained in great detail the remedial nature of the statute, and how its express purpose is to protect subcontractors, and not the Commonwealth. It cited many prior court decisions opining that the statute should be construed liberally to accomplish its intended purpose of getting subcontractors and material suppliers paid for their work.

Whether courts will find additional duties for awarding authorities on public construction projects in the future is uncertain, nor do we know whether the University of Massachusetts will appeal this decision. However, at least for now, this decision provides some comfort for subcontractors and material suppliers that some form of payment security should exist when they perform public work.

E-mail Acceptance Can Constitute Contract for Massachusetts Mechanic’s Liens

By on March 9, 2015

The Massachusetts Superior Court recently held that electronic communications and signatures — no less than physically signed documents — can constitute a “written contract” for general contractors, subcontractors and construction material suppliers, within the meaning of the Massachusetts mechanic’s lien statute, G. L. c. 254. In Clean Properties, Inc. v. Riselli (“Clean Properties”), the parties mainly communicated via e-mail. The defendant, a property owner, sought to discharge the mechanic’s lien levied against her property for work performed by the plaintiff, a contractor. Because the parties never executed a paper contract, the property owner argued that the contractor could not meet the mechanic’s lien statute’s requirement of a written contract. The court held otherwise.

Applying the Uniform Electronic Transactions Act (UETA) adopted by Massachusetts in 2004, the court held that, where there is a clear intent between parties to conduct their business via electronic means, an enforceable contract can be formed when one accepts a written offer via e-mail. Thus, in certain circumstances, an electronic signature — such as one’s name at the end of an e-mail — can have the same legal effect as a physical signature on paper. See G.L.c. 110G, §7(b) (“contracts may not be deemed unenforceable solely because electronic records were used in formation.”).

In Clean Properties, the parties’ e-mail correspondence made clear that each intended to enter into a contract. Specifically, the court held that the contractor had extended an offer by attaching contract terms to an e-mail with instructions for the property owner to respond, if desired, with an acceptance. The property owner replied as instructed and included her name at the end of the e-mail. Because this reply formed a contract under the UETA, the court concluded that the parties’ e-mail communications sufficed to establish a written contract within the meaning of G. L. c. 254. Contractors and construction material suppliers should still be diligent in getting formal contracts signed. However, this is a positive sign for the future use of electronic communications in negotiating construction contracts.

The case is Clean Properties, Inc. v. Riselli (Salinger, J.) (Middlesex Superior Court) (Docket No. MICV2014-04742) (June 18, 2014).