Creative Solutions That Are Cost Effective

Arizona Construction Lawyers With Over 25 Years of Experience

We represent a wide range of trades in the construction industry, including earthwork contractors, concrete contractors, HVAC contractors, steel fabricators, masonry suppliers and installers, electricians, structural repair contractors, plumbers, truss manufacturers, roofers, painters, commercial glass fabricators and installers, fire suppression contractors, and more. Our expertise extends to advising and representing property owners, architects, engineers, developers, sureties, general contractors, subcontractors, and suppliers in various legal matters pertaining to commercial, industrial, residential, and public construction projects and running construction-related businesses. Our construction attorneys possess extensive knowledge and experience in all aspects of construction law, including enforcing payment through mechanics liens and bond claims, initiating foreclosure actions, handling design claims, defect claims, and delay damage claims, and drafting, reviewing, and modifying residential and commercial contracts. We have a deep understanding of your industry, and we are committed to listening to your needs and adding value to your company.

• As Arizona Construction Lawyers, We Know Commercial Constructions Disputes
• Delayed Performance
• Design Defects and Defective Work
• Failure to Pay and Right to Withhold Payment
• Change Orders and Extra Work

As Experienced Construction Lawyers in Arizona, We Possess In-depth Knowledge of Commercial Construction Disputes.

It is uncommon for a commercial construction project to achieve substantial completion without encountering issues. While some problems may be minor and easily resolved, others can be severe enough to result in termination or withholding of payment. With over 25 years of experience as Construction Attorneys in Arizona, we have dealt with a wide range of commercial construction disputes. If you are currently facing a dispute or anticipate one, please reach out to us at 602-362-2396 or submit the Contact Form. We would be happy to discuss your dispute and explore your legal options at no charge. Below, we outline the four most prevalent types of commercial construction disputes and their corresponding legal implications.

DELAYED PERFORMANCE

Both parties involved in a contractual agreement have a responsibility to fulfill their respective obligations within the agreed timeframe. Property owners typically need to promptly obtain permits, provide the necessary work space, make material selections, address design-related queries, approve or reject changes, and review and process payment applications without delay. On the other hand, contractors and subcontractors are expected to submit a project schedule in a timely manner, pre-order materials, engage subcontractors and material suppliers, provide lien waivers and releases, and complete the work within the agreed-upon timeframe. If one party fails to meet their material obligations within the specified timeframe, the other party may be entitled to terminate the contract and seek monetary compensation. Your contractual rights are determined by the terms of your agreement, which often require the non-defaulting party to serve a formal Notice of Default and provide the defaulting party an opportunity to rectify the situation. If the default cannot be remedied within the given timeframe or is incurable, the non-defaulting party may have the right to terminate the contract with just cause and pursue damages.

PROPERTY OWNER DELAYS: Common issues that may arise include: (1) not granting access to the agreed workspace; (2) hindering access to the worksite; (3) excessive change orders; (4) failing to provide specific plans or specifications, leading to an abundance of requests for information (RFIs); (5) not providing materials in a timely manner or providing incorrect materials; and (6) not approving work phases promptly.

CONTRACTOR DELAYS: Common causes of project failure can include:

1. Inadequate mobilization
2. Poor project management
3. Lack of coordination with subcontractors
4. Inefficient procurement and delivery of materials
5. Insufficient workforce
6. Deviation from project schedule
7. Subpar work performance leading to rework
8. Delay in obtaining necessary permits.

DESIGN DEFECTS AND DEFECTIVE WORK

Design defects and defective work are common sources of commercial construction disputes. Design defects may include errors, omissions, or inadequacies in the plans and specifications provided by architects and engineers. These deficiencies can result in change orders, delays, cost overruns, or even project failure if not addressed promptly. Defective work, on the other hand, refers to work that does not meet the required standard of care and is not consistent with industry practices. Defective work often leads to rework, delays, and additional costs for both parties. As experienced Construction Lawyers in Arizona, we can help you navigate these disputes by identifying the responsible party and pursuing appropriate legal remedies.

FAILURE TO PAY AND RIGHT

PROPERTY OWNER DELAY DAMAGES: Possible damages that can arise from a delay include: (1) lost business or operational profits; (2) diminished rental value; (3) increased interest charges and financing costs; and (4) ongoing rental expenses during the holdover period. In some cases, a contract may specify liquidated damages as a means to quantify the delay damages. However, for such provisions to be enforceable, they must satisfy a two-part test: (1) the damages must be difficult or impossible to estimate at the time of contract formation; and (2) the liquidated damages should reasonably approximate the actual harm caused by the delay.

CONTRACTOR DELAY DAMAGES: can include: (1) increased field overhead, such as personnel, temporary facilities, insurance, utilities and other field office costs; (2) unabsorbed home office overhead; (3) mobilization/demobilization costs; (4) equipment rental fees; (5) increased labor and material costs; (6) loss of productivity from working out of sequence; (7) lost profits; and (8) lost business opportunity.

Some contracts include a provision known as “No Damage for Delay” (NDFD), which allows one or both parties to waive their right to claim damages for delays. However, there are five exceptions recognized when enforcing an NDFD provision:

1. When the delay was not intended or anticipated by the parties to be covered by the provision.
2. When the delay was caused by intentional and/or wrongful acts of the party seeking to enforce the provision.
3. When the delay has been unreasonably prolonged to the extent that the delayed party would be justified in terminating the contract.
4. When the delay does not fall under the specific delays specified in the provision.
5. When the delay was caused by arbitrary and/or capricious conduct.

TERMINATION FOR CONVENIENCE

In some cases, one party may seek to terminate a contract for reasons that are not related to a breach of contract or default. This is known as a termination for convenience (TFC) clause. TFC clauses allow the terminating party to end the contract without incurring any liability, but only if there is no bad faith or misrepresentation involved.

Termination for convenience clauses are commonly found in contracts that involve long-term commitments, such as government and construction contracts. This type of clause gives the parties flexibility to end the contract should unforeseen circumstances arise or if the project is no longer necessary or feasible.

One key advantage of a termination for convenience clause is that it allows both parties to avoid potentially lengthy litigation or arbitration processes. Instead, they can terminate the contract quickly and move on to other projects.

However, termination for convenience clauses are not always straightforward and may be subject to legal challenges. For example, if one party believes that the other party is using a TFC clause in bad faith or as a way to escape their obligations under the contract, they may take legal action.

Some contracts also contain a “Consequential Damage Waiver” wherein both parties waive their respective right to recover consequential damages suffered as a result of a delay. Under a typical Consequential Damage Waiver, a property owner might waive the following categories of damages: (1) loss of rental expenses, (2) loss of use, (3) loss of income, and (4) loss of productivity. Under the same provision, a contractor might typically waive the right to recover: (1) increased principal office overhead, (2) loss of financing, business, and reputation, and (3) loss profits.

FAILURE TO PAY AND RIGHT TO WITHHOLD PAYMENT

Property owners and contractors must timely pay their contractors, subcontractors, and material suppliers. Under the Arizona Prompt Payment Act, payment is considered late if it is not made within 30 days of the invoice date, unless otherwise specified in the contract. If a party fails to make timely payments, the other party may have a right to stop work or terminate the contract and seek monetary compensation. Property owners are also obligated to provide contractors with adequate funding for the project and pay progress payments as agreed upon in the contract.

However, there are some instances where a party may have a right to withhold payment. This can be for reasons such as unsatisfactory work, unapproved change orders, or unresolved disputes. In these cases, it is important for both parties to follow the proper procedures and documentation required to exercise their right to withhold payment and avoid potential legal repercussions.

In commercial projects, it is common for the general contractor and subcontractors to include either a “paid-if-paid provision” or a “paid-when-paid provision” in their contracts. These provisions aim to transfer the payment risk from the general contractor to the subcontractor. However, it is crucial to understand the difference between these two provisions.

A valid paid-if-paid provision relieves the general contractor from paying the subcontractor if the property owner does not pay. To be enforceable, paid-if-paid provisions need to be unambiguous, but there is no specific language required. The key to enforceability is a clear and concise statement that the subcontractor assumes the risk of non-payment if the contractor is not paid by the property owner. However, a contractor may not enforce a paid-if-paid provision if non-payment is solely the contractor’s fault and not the fault of the unpaid subcontractor.

On the other hand, a valid paid-when-paid provision may require the general contractor to pay the subcontractor even if the property owner does not pay. However, the general contractor has a reasonable time after non-payment to fulfill the payment obligation. Often, unenforceable paid-if-paid provisions are converted into paid-when-paid provisions. Therefore, when dealing with such provisions, it is essential to have them analyzed by a construction lawyer, whether to enforce or defend against them.

CHANGE ORDERS AND EXTRA WORK

Disputes often arise due to change orders, or the lack thereof. While most contracts include provisions on how to handle changes in the work, these provisions are rarely followed by either party. A well-drafted provision should require the execution of a change order, detailing the change itself, the impact on the contract price, and whether the contractor will receive additional time. Additionally, most provisions state that failure to obtain a fully executed change order before commencing the work will result in a waiver of payment for any additional work.

However, there is one notable exception to the requirement of a written change order. If the parties have knowingly waived this provision through their conduct, such as multiple changes being made throughout the project without a written change order, the contractor may argue that the provision has been waived or that the verbal requests constitute separate verbal agreements outside the contract.

It is crucial to navigate these circumstances carefully, considering the implications on contractual obligations and potential disputes. It is always recommended to have a written change order executed before making any changes or extra work on a project, as it can help avoid conflicts and misunderstandings between the parties. So, parties should carefully review and adhere to the contract provisions related to change orders and extra work to ensure smooth project execution. In case of any disputes, seeking the assistance of a construction lawyer can help resolve the issue efficiently and effectively.

IF YOU ARE INVOLVED IN A CONSTRUCTION CONTRACT DISPUTE, PLEASE CONTACT ANTHONY LAW GROUP US TO DISCUSS YOUR LEGAL RIGHTS AND OBLIGATIONS. OUR EXPERIENCED TEAM OF CONSTRUCTION LAWYERS CAN PROVIDE YOU WITH GUIDANCE AND REPRESENTATION TO HELP RESOLVE YOUR DISPUTE IN THE MOST EFFECTIVE MANNER POSSIBLE. WE UNDERSTAND THAT CONSTRUCTION PROJECTS CAN BE COMPLEX AND COSTLY, WHICH IS WHY WE ARE COMMITTED TO PROVIDING OUR CLIENTS WITH STRATEGIC ADVICE AND ADVOCACY TO PROTECT THEIR INTERESTS. DO NOT HESITATE TO REACH OUT TO OUR FIRM FOR HELP WITH YOUR CONSTRUCTION CONTRACT DISPUTE.